- Understanding the Deal -

What I don't get is why Paulson and Bernanke think having the government overpaying for the bad debt is a good idea. (Krugman's latest bit here.) That is, why are they resisting the idea of an equity stake?

Of course, an equity stake would mean that we have in essence nationalized the financial sector, and nationalization seems a boogey man to the right (but also to the libertarians). At some level, I understand the alarm. But really is nationalizing the financial sector to the tune of a trillion bucks give or take so much worse than sticking the public sector with the bad debt? (Which will prove once again that the government only knows how to lose money, right?)

In any case, I'm not seeing the downside of the equity stake spelled out, and if Paulson and Bernanke want this blank check they need to do some serious explaining.