I’m linking to Ezra, but he’s just one of many people writing things like this:

Already, various models have emerged for gaming the Treasury plan. Karl Denniger posts one scenario where an institution has $100 billion in toxic assets with a current value of 30 cents on the dollar. That institution — call them Screw Bank — bids on its own assets at 75 cents on the dollar. Screw Bank provides 5% of the equity, with the rest covered by Treasury, The Fed and the FDIC via guaranteed bond issuance. The loan, save for Screw Bank’s bit of equity, is non-recourse, so they can lose 5% of the total portfolio purchased, but nothing more.

If the assets bust in that scenario, Screw Bank loses 5% of $75 billion, or $3.75 billion. The taxpayer gets hit for the remaining $71.25 billion dollars.

Or imagine a hedge fund buys a pool of assets for 50 cents on the dollar. They also buy a credit default swap against the pool proving worthless. If the pool jumps in value, they make money. If the pool busts, they walk away from the original loan and collect money on the CDS contract.

Look, there is simply no way to come up with a complex, multi-prong, trillion dollar scheme to rescue the financial system and describe it in 40 or so pages worth of fact sheets, white papers, and summaries of terms in such a way that enterprising bloggers can’t come up with loopholes and ways to game the system. Does anyone really think that when the complete plans are released, they won’t contain hundreds of pages of fine print designed to eliminate the potential for this kind of stuff?

As Economics of Contempt says, we don’t have nearly enough information about the plan to judge it fully, let alone to know how to game it. I’m beginning to think that Paul Kedrosky is right — that while there have been some sober and intelligent takes on the plan, pro and con, much of the commentary has been fairly out of touch.