I seriously hope that this report about the “Bank Rescue” is wrong, or else I’ll have to say that Obama has come up with an idea even dumber than the Republican’s “fix” for the economy…which I didn’t think was possible.

The title of the post is taken from Yves Smith who opens with, “Dear God, let’s just kiss the US economy goodbye.” I’ve been reading Yves for quite a while and think she is the foremost economic commentator on the internet because she is willing to challenge status quo but is not calling for a complete change in our economic setup. She also is rather staid but is willing to call a spade a spade…so I don’t mistake her opening for rash hyperbole.

The primary problem with the proposal is that it ignores we are only about 1/3 of the way through the write downs, and have just entered the beginning of the largest wave. If the plan is being reported correctly, they are acknowledging that there are too many bad assets to buy outright but, “The centerpiece of the plan would be a guarantee to limit losses on a second group of troubled assets that can be kept by the banks because they have more stable prices.” I have a feeling that they are dramatically underestimating the amount of losses on that second group and most of them will have to be bought or else the banks will fail anyway.

While the Republican housing plan is obviously just a back door to flow money to banks in a more palatable way (or theft, depending on your viewpoint) this plan is more akin to putting the US government in front of a train and praying that it is still standing after the collision. It’s not hyperbole to say that this plan will put the integrity of the US Government in doubt and that we need to stop being insane and change our strategy.