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Greg Ip quantifies the level of intervention thus far, and warns that there could be far more to come.

Before the crisis began, the Fed had $868 billion of assets, 91 percent of them in innocuous Treasury bills and bonds. Now it has $1.6 trillion in assets, with less than 30 percent of them in Treasuries… $1.8 trillion in assets is equal to just 12 percent of America’s gross domestic product… At its peak, the Bank of Japan’s balance sheet amounted to 30 percent of GDP…

Paulson has managed to take the UK inspired (perhaps by Buffet) recapitalisation plan and weaken the impact while increasing the benefits to bank management. Willem Buiter, always good, points out that Paulson is screwing US taxpayers on the terms he is dictating with the banks.

The US tax payer is getting a terrible return on the $125bn worth of capital that was injected on his behalf by US Treasury Secretary Paulson into the nine largest US banks… In the case of the Fortunate Nine, the injection of capital is through (non-voting) preference shares yielding a ridiculously low interest rate (5 percent as opposed to the 10 percent obtained by Warren Buffett for his capital injection into Goldman Sachs). Without voting shares, the government has no voice in the running of these banks. It also has no seats on their boards… The UK preference shares have a 12 percent yield and come with government-appointed board members… In addition, in the the case of the Fortunate Nine, there are no attractively valued warrants (options to convert, at some future time, the preference shares into ordinary shares at a set price or at a price determined by some known formula). Quite the opposite, the preference shares purchased by the US state, can be repurchased after three years, at the banks’ discretion, on terms that are highly attractive to the banks… That, I would argue, is scandalous, both from a fairness perspective and from the point of view of the moral hazard this creates, by boosting the incentives for future reckless lending…

Stiglitz thinks the same.

Paulson figured he could reshape the UK approach in a way that was even better for America’s banks than his original cash strategy. The fact that US taxpayers might get trashed in the process is simply part of the collateral damage that has been a hallmark of the Bush administration…

It’s almost as if Paulson cares more about his friends and business associates than he does about the average taxpayer…

Update 13 Nov 08

Washington Post reports the Bush administration has taken no action to fill congressionally-mandated independent positions to oversee how the bailout is used. A deadline for the first bailout monitoring report has already passed. The Treasury has committed $290 billion in taxpayer money so far. Eric Thorson, the Treasury Department’s inspector general, said, “It’s a mess. I don’t think anyone understands right now how we’re going to do proper oversight of this thing.”