Bride of TARP

The Citigroup bailout -- in which the government takes all the downside risk after about $40 billion in losses on $300 billion in assets -- is the consequence of the breakdown in the ability of the magical free market to set a price. No one could figure out how to price this stuff, so the original troubled asset relief program couldn't work. The only thing to do was have the government take the worst of the risk and see what the market makes of the rest of it. For these financial assets, the hand is invisible because it's not there at all.