Larry Kudlow, the same person who mangled the Broken Window Fallacy (calling it the “Broken Window Effect” which would increase overall wealth), now is claiming that this bailout is a “win-win-win-win” for taxpayers.

I have one question for Kudlow: If this is such a potentially good deal, then why are not banks and other investors snapping up these mortgage securities right now?

Kudlow claims that this bailout is necessary to clear the way for this Really Good Deal. Yet, why what special knowledge does the government have that investors don’t? They rejected these securities for a reason, and even at fire sale prices, no one — no one — wants to buy this garbage.

So, is he telling us that the markets simply are being myopic, and that there are great deals out there that everyone is missing — but the government? Somehow, that makes no sense to me.