The Geithner Plan: How the Public Can Gain
One further thought about the Geithner bailout plan: a lot of relatively small and new public-private investment partnerships are going to be issuing debt with an FDIC wrap. In pratice, that’s likely to mean bonds with no credit risk but with a large illiquidity premium. If you’re a risk-averse retail investor who doesn’t want to take credit risk but who’s also scared of the Treasury bubble, this could be a sensible investment. You get none of the upside, none of the downside, and a large part of the implicit subsidy. It’s just a pity that it’s so hard for retail investors to buy bonds in the US.
Reprinted from Portfolio.com