Of Rescue Plans, Loopholes, and Pessimism

UPDATE: TPM has more on the WaPo article and divergent responses from within the administration.
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Pat Garofalo identifies just one of the reasons why, I think, a guy like Paul Krugman has so little faith in the current bank rescue plan. When failed banks that have broken the public trust can continue to openly manipulate the rules designed to neutralize so-called toxic assets, reestablish capital, and restart credit, then yes, I think, the rescue plan is insufficient to solve the problem.

What's more, if the administration really believes it has no choice but to allow this kind of chicanery in order to get the banks to play along at all, then I become increasingly pessimistic about the safety of the taxpayer investment. If the WaPo reporting is correct, and if the rescue plan succeeds to the degree that the economy stabilizes and begins to rebound, families on the brink can stay in their homes, and individuals and small businesses that should get credit do, then the administration may be able to breathe a sigh of relief for having dodged a bullet. At that point, an overall positive outlook may obscure the foul nature of these deals that the White House seems all too willing to make. But if circumstances don't wash like that, then I may share a Krugmanic pessimism about Obama's ability to finesse a disillusioned political landscape for more patience and money should the need arise.