Whoever thinks Paulson will fairly negotiate a deal with his old pals on Wall Street – fair for the American public, that is – I have some toxic debt to sell you for a great deal. We need to go way back to the start and look at what is fair for the taxpayer, not for Wall Street. And again, if we’re going to have control of their sorry businesses, we need much more control of this situation. Remember, the American taxpayer did not ask for this, but were forced into this dreadful situation due to the failures of Wall Street. We should not help Wall Street continue their lifestyle, especially if it’s only a very short term boost, as many are suggesting. The panicked intervention will not stop this economy from unraveling and may only delay the inevitable.

More from Krugman:

I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets. As I posted earlier today, it seems all too likely that a “fair price” for mortgage-related assets will still leave much of the financial sector in trouble. And there’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away?

Looking forward, when every other industry comes to Washington for their latest installment of corporate welfare (such as Detroit and the airline industry) we also need to seriously review executive compensation. If the taxpayers are going to be on the hook for bailing them out, it is only fair that the Mr. $21 million in four weeks at Ford either refuses compensation for this period or is paid a very low salary. The Detroit CEOs and senior executives have all blown it, so come back to planet earth instead of living the high life. Live on the salary of a line worker without all of the side benefits and then talk to us about a bailout.