It turns out Krugman's winning the Nobel was a very bad thing in as much as it's cut down pretty dramatically on his economics blogging during these critical days. In any case, we now have a limited if not quite mini-bank recapitalization of $250 billion. But I'm curious to find out more about just how this is being organized. Yesterday Neel Kashkari, the guy Paulson's put in charge of this whole operation, said "We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs, the equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions. It will also encourage firms to raise new private capital to complement public capital."

A couple questions. What kind of stock is the taxpayer getting? This strikes me as different from what they're doing in the UK -- and not as good a deal for the taxpayers. Second, a purely voluntary approach troubles to me. All things being equal, it would be nice for everything to be voluntary. But given the balance here between what secures the viability of individual institutions vs. what stabilizes the whole banking and credit system, I think this probably sets up some perverse game theory incentives. More to the point, the US taxpayer has no particular interest in saving individual institutions for their own sake. Taxpayers have a strong interest in stabilization the whole banking sector. And obviously the two are intrinsically connected. But given that priority I think the government needs to be more in the driver's seat about the best strategic allocation of resources. Let's be frank, even a lot of the 'healthy' institutions would likely go under, if we just let the market panic take its course. So for all of them beggars can't be choosers.

Late Update: Two articles in the Post this morning suggest that while technically voluntary, the 9 national banks who will be getting half the money were told, in so many words, that it was an offer they could not refuse. That at least sounds like the USG is making the decisions about the best allocation of resources. But given that all of these banks, even the 'healthy' ones have been begging for and receiving immense taxpayer largesse over recent weeks, the suggestion of compulsion seems a bit overplayed.

Later Update: Post columnist Steven Pearlstein has an excellent column today basically arguing that it's time for the Street to step up. Key passage ...

"After yesterday's "historic" meeting, we are told by industry apologists that we are supposed to be grateful to nine leading banks for having "volunteered" to accept additional capital from the Treasury, along with a government guarantee for newly issued bank debt, even if it means having to accept a dilution of existing shares and a few harmless restrictions on their operations.

Pardon me if I'm less than blown over by this munificent offer, but it hardly seems commensurate either with the severity of the current crisis or the depth of the banks' culpability in fomenting it.

This is really key. The US taxpayer has put trillions (direct in the sense of the bailout, but also the money flooding out of the Fed) on the line to save these guys, because at some level we need to save them, or at least most of them, to save ourselves. And we're supposed to be grateful they're 'accepting' infusions of capital?