BondGeek

The Time To Buy Is When Blood's In the Streets

Good analysis, but I think it's worth thinking about exactly why Krugman's conundrum is wrong. This crisis is less about credit than liquidity. Admittedly it started with credit, but the contagion is driven by liquidity--specificall... the unwillingness/inabilit... of the holders of capital to decide to commit given the uncertainty of the extent of assets waiting to come on the market. If the holders of tainted assets can expect to be taken out at something more than liquidation value, that uncertainty will not disappear (if you're going to pay me more than market, suddenly ALL my under-water assets are going to be classified as "troubled" if I pull it off). Warren Buffett said this morning that he is "betting that Washington will do the right thing", meaning that he thinks Treasury will use its cheap financing to take the overhang out of the market. I do not understand why Paulson, who famously saw to it that Bear Stearns was sold as cheaply as possible, is floating this idea of a compromise price between "hold-to-maturity" and market.

The rights and wrongs of socialized banking and the mechanism are separate from understanding the impact on investments if this proposal goes through. If you think you know of quality assets that are cheaply priced, the major obstacle to committing capital (uncertainty about liquidity) will be reduced only if you really think that the next opportunity will not be significantly better.

Meredith Whitney & I Agree, Bail Out or No Bailout

Excellent points, all. One thing that needs focus is the probability that the bailouts and a socialized financial system will only prolong the "Great Cleansing"--or, to bend the metaphor, instead of the dirtiest getting clean we'll all be more or less covered in muck.
(Btw, if you had to pick between socialized medical and socialized banking, which you pick?)