Mish runs one of my favorite economic blogs, but today he actually agree with Paul Krugman three times!  He links a lot of intelligent analysis of Geithner’s plan that you should go read.  Then he concludes.

There have been a lot of intelligent comments by Yves Smith, CalculatedRisk, and Krugman. So far no one has said what I think the plan is: a gigantic confidence game.

This is similar in nature to fraudulent schemes that promise “what’s inside the bag is worth $1 million, unless you open the bag”.

In this case there may be a few “good bags” similar in nature to salting the mine schemes, but for the most part everyone knows what’s in the bag is toxic garbage. What really makes no sense whatsoever is why the government would risk 97% with shared “upside” instead of just buying it all.

Somehow, Geithner (and Obama by implication) believes that igniting a bidding war between hedge funds and private equity over a bag of cow manure will inspire confidence that there’s gold in the bag. Such insanity cannot possibly work, which means it won’t.

via Mish’s Global Economic Trend Analysis: Geithner’s Plan, a Gigantic Confidence Game.

It seems that everyone is dedicated to continuing to pretend that we are in “a liquidity cricis.”  But the problem is not liquidity.  The promise is solvency.  These “assets” were always liabilities once the bubble popped.  There is nothing the government can do about it except make sure the bets of the rich and powerful are covererd by the lower classes.