Guess what? We're rubes

Well, this was certainly to be expected.

...[A]ccording to the Journal, finance industry lobbyists are already giving orders to Republican hill staffers not to allow any meaningful reforms or protections for taxpayers. So, just the money. No strings attached.

House Republican staffers met with roughly 15 lobbyists Friday afternoon, whose message to lawmakers was clear: Don't load the legislation up with provisions not directly related to the crisis, or regulatory measures the industry has long opposed.

"We're opposed to adding provisions that will affect [or] undermine the deal substantively," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, whose members include the nation's largest banks, securities firms and insurers.

A deal killer for the group: a proposal that would grant bankruptcy judges new powers to lower the principal, interest rate or both on a mortgage as part of a bankruptcy proceeding.

So, it looks like we're bailing out an industry, but regulations? Some relief for home owners crushed under the weight of a mortgage they can no longer afford? If industry lobbyists and Republicans get there way, No. And, no.

But wait. There's more! Taxpayers get nothing in return for forking over $1 trillion.

Here’s the thing: historically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets. The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the RTC. The Swedes took over troubled banks, again protecting their depositors, before transferring their assets to their equivalent institutions.

The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

Marshall has a nice phrase for this: "Moral hazard on steroids."

Keep your eyes on Senators Clinton (D., Bear Stearns) and Schumer (D., Morgan Stanley). As they go, so goes this package.