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Curing the Credit Crisis: A Better Alternative Plan

I don't think Bernake is suggesting paying full price, as you imply (read his comments more closely). Rather, I believe he is suggesting paying a price that more closely represents the fundamental long-term value of the securities (which, of course, incorporates folreclosre/default expectations for the loan pools and will likely be well below par -- I believe Gross at Pimco is estimating the Treasury could pay about 65 cens on the dollar and will yield a substantial return on this "bailout" investment. The challenge is determining what is the true fair price as it is by no means a straightforward calculation and is subject to subjective considerations.