"Meanwhile, House Republicans won a major victory, persuading negotiators to include a provision that would require the Treasury Department to create a federal insurance program that would guarantee banks and other firms against loss from any troubled asset, the official said."
My problem with this is that given the choice of selling non-preforming assets for cash versus spending money to insure these assets that the banks will simply choose to take the money and run. What would motivate them to subscribe to the Republican plan when they can cash out from the $700 billion piggy bank? It's not obvious to me that they would.
Well, theoretically, you could sell the assets to the Treasury for 25 cents on the dollar, or you could have them insured, which would effectively make them free of default risk and so they should now be priced closer to 100 cents on the dollar. The insurance might go for only a few percent, meaning you could profit big from it.