On Jan. 29, Barry Ritholtz, on his well-regarded financial blog, “The Big Picture” posted a document that he was told was part of a presentation made by Goldman Sachs to senior staff of the Senate Banking, the House Financial Services, and the Joint Financial Services Committees, as well as other leadership staff.

Ritholtz comments:

Sources have informed me they wonder if the plan discussed by Goldman was put forward in coordination with, with knowledge by, or with support from the Treasury Department

Among the recommendations in the report.

“A government program which provides non-recourse [emphasis mine] loans for asset markets should have a material impact on addressing these current challenges and could be an attractive alternative for the “aggregator bank” to explore:”

As we know from the the Feb. 17 Washington Post story "Late Change in Course Hobbled Rollout of Geithner’s Bank Plan", Tim Geithner and company had for weeks been working on a plan in which the government would either directly buy (and overpay for) toxic assets from financial institutions or insure them against losses on those assets. Late in the game, Geithner decided that that wouldn’t work (read “couldn’t be gotten away with”); instead, his testimony on Feb. 10 described a vague plan for a “public-private investment fund”, which would provide financing for hedge funds and private equity firms to buy toxic assets.

Today, the Financial Times had more detais about the plan:

Details of the scheme are still being worked on. Yet some people involved in the interagency process say the authorities could provide $6 of loans for every $1 in equity capital deployed by the private investors joining the government’s Public Private Investment Fund.

The FT article did not mention the matter of recourse vs. non-recourse; that’s a very important detail.
I’ll let another excellent financial blog “Interfluidity” explain what a non-recourse loan is:

a very generous gift to investors that participate in this program (and indirectly to the banks that sell assets to them). A non-recourse loan bundles an ordinary loan with an option to "put" the collateral back to the lender instead of paying off the loan. Sometimes this is not much of a gift: When a pawnbroker lends you half of what your Fender Stratocaster is worth, and the fact that you can surrender the guitar rather than pay off the loan is cold comfort. But if someone fronts you substantially all of what an asset is worth, and the value of that asset is uncertain and volatile, then the put option bundled into the "loan" becomes extraordinarily valuable. If the asset appreciates, you take the profits and "ka-ching!". If the asset falls in value, the lender takes the trash and eats the loss.

A near-the-money option is itself a valuable asset. Offering non-recourse loans to participants in the PPIF would directly contradict the program’s goal of "allow[ing] private sector buyers to determine the price for… troubled… assets." Private sector buyers would not be pricing the assets themselves: they would be pricing a portfolio containing a troubled asset and a free, three-year put option, courtesy of the Fed. Depending on how much of the transaction the government is willing to finance, the value of the put option could represent a substantial fraction of the value of the asset being priced. This is a subsidy, that would be incorporated in the sales price of the asset and split by banks and private investors. It amounts to the government bribing investors to certify banks as more solvent than they are, by overvaluing bank assets in subsidized purchases.

With the 6:1 ratio mentioned in the FT article, an approximately 15% floor would be set for the firms that purchase these assets, and they would get all the upside (Clever boy that he is, Timmy might throw in some nominal, cosmetic upside participation for the taxpayers.).

Such a program would be a wonderful filtering device, ensuring that the shit-tay-est of the shitty assets would end up being owned by the taxpayers, who will have paid at least 15% above-market rates for them.