Deja vu all over again

As if you haven't already seen this laid out six ways from Sunday, Krugman goes over the stealth bailout again in simple language.  The money quote:

What I suspect is that policy makers — possibly without realizing it — are gearing up to attempt a bait-and-switch: a policy that looks like the cleanup of the savings and loans, but in practice amounts to making huge gifts to bank shareholders at taxpayer expense, disguised as "fair value" purchases of toxic assets.

I suspect that they guys at the Treasury realize it and the guys at the Fed don't, and this is perhaps part of why it can happen.  The interaction of a highly politicized Treasury and a supposedly a-political Fed are a recipe for disaster in the same way that letting the fox into the EPA or FDA hen-house only becomes apparent when you later realize that there's just one guy in a basement doing all the inspecting for lead in Chinese toys.