An unusual opportunity?
The Mother of All Excuses

Remember Fantasy Island? "The plan, Boss, the plan!" (Sorry.)

By the time you read this, the Mother of All Bailouts may already be law. But I want to note my old boss Ed Leamer's questions, and also those of the Manhattan Institute's Nicole Gelinas. (These pertain to the original plan, but most if not all seem to apply to the revised plan.)

And see Arnold Kling's stern warning.

Finally, color me skeptical about the in-vogue "carry trade" argument:

Financed at 3% to 4% by the sale of Treasury debt, Treasury will be in a position to earn a positive carry, or yield spread, of at least 7% to 8% on the purchases, even after taking into account severe assumptions of default rates and foreclosure recoveries. . . .

By most accounts, current losses on U.S. mortgage paper -- the difference between face value and current fire-sale prices -- stand at about a trillion dollars. In a sign of the distortions from panic selling, eventual losses on the underlying morgtages figure should be no greater than $250 billion. The market, irrationally, is assuming losses of four times that amount.