Do Bad Banks Offer Defective Toasters?

Here's a bank that won't be too big to fail: the Public-Private Investment Program (PPIP), which is expected to be unveiled Wednesday. The PPIP, once dubbed the "bad bank" (on the principle that it would buy up so-called toxic assets from large financial institutions that were receiving Troubled Asset Relief Plan funding), has lost limbs and pined with scurvy during its long passage. If it arrives tomorrow, PPIP will be a much smaller vessel, displacing a mere $50 billion rather than the $1 trillion originally foreseen.

Charlie Gasparino reports that nine firms will participate in the program, including one run by vulture investor Wilbur Ross and a joint venture between GE Capital (which may want to sell off a few toxic assets of its own and then buy them back) and private investor Angelo, Gordon & Co.

New "King" of Wall Street Larry Fink, the lightning rod supergenius* who did so much to make this golden age of mortgage-backed-securities possible, may also participate through his BlackRock investment management firm.

Will there be any good buys out there? As long as some critical mass of borrowers continue to service their debt (and even in this degenerate land that's still true of the majority of borrowers), the same mix of assets that would sink, say Mirae Bank, could theoretically pay off for experienced buyers of troubled assets. With a $50 billion public backstop on losses, this seems to fit the "heads I win tails I break even" setup favored by Rep. Barney Frank (D-Mass.).

Caveat: It's not really clear whether the PPIP will be buying debt instruments.

Even at these prices, PPIP does not seem to have tempted weather-controlling madman George Soros into participating. Seeking Alpha's Tom Lindmark says the small-enough-to-fail banks will continue to bleed until they die, so the whole program should scrapped, scuttled and scuppered.

* I'd like to take only a half-sarcasm point here, since I do think mortgage-backed securities were an impressive financial invention that will, in time, return to viability (if they haven't already in some markets).