Geithner Plan: could it be really clever...

What if, Geithner is a Good Guy, who has a Real Secret Plan which the bailout is intended to effect, and which will do enormous public good?
I mean, we can hope, right?
That he is not just another Goldman Sachs frontman who has confused What is Good for Goldman being in the US or World Interest?
Right?

Brad deLong defends the Geithner plan to relieve the banks of their pile of crap

ok, so lets take the first assumption for granted: that a patient investor, not beholden to next quarter's cash flow or mark-to-market capitalization accounting, really can pick up systematically undervalued bundles of debt hold them for a long time, enjoying the cash flow as income, and come out having made surprisingly large amounts of money over the long run.

So why is that not a ginormous give away to the hedgies and vultures?
Well, it may be a time scale issue - the hedgies, for the most part, don't care if there is net cash flow in 17 years - they want their 20% cut next quarter, or next year if they are patient.

But, the pension funds care.
In which case the private equity funds and hedgies are a red herring, the Geithner Plan is aimed at recapitalizing the Pension Funds, who will get to share with government in the large returns the Patient Investor gets in the long run.

That would be very nice, if it works out this way.
Which requires a reasonably short(ish) recession (ok it will be at least 2 years, but hopefully not much more than 3 years, right?), and eventual recovery and regrowth across the board of all markets.
Maybe.

Of course, as Brad notes, if that goes badly wrong, bits of paper won't matter: you'll want water, arable land, spices and tools...

The Catch, as nemo points out, (h/t Krugman), is that the vultures can game the deal and turn it into a "tails I win, heads you lose, and I still win", and just perpetuate the Great Looting.
In which case we will either have to nationalize them, 'cause really, they can't have ALL the money, right?
Or we hang them, but only after fixing the loophole in the inheritance laws.

What could possibly go wrong?