After the last bubble though properties did eventually reach their overvalued state, in fact they broke it considerably. I'm wondering as you're someone who has seen this from inside if you think that will happen again ? Also, I think it's important to note that this bail out isn't just covering the mortgage, insane credit, debts but also the garbage debts in other markets. It's not touching the problems in derivatives though.

I dunno, it all depends how these debts get traded. Granted, nothing they're suggesting isnt gowing to blow up later, it is, but it's very unpredictable as to how it'll play out. After all, the last time something similar was done the govt did actually turn a profit out of the debts it bought. Basically, although you'll never see a commentator over there say it, the US govt is nationalising the market. They'll have more control over it than they've ever had.

It will be interesting to see the full details of the plan, especially how the debt auction will work (and when), and also how the agency they set up to manage it functions within (or creates a new) legal framework. Whatever, I forsee China and other sovereign funds (singapores perhaps) owning a lot of US banks eventually.

Edit : Also, I think you're wrong about the bail out being based on current valuations, although obviously it has to cover the debts (which were obviously based on them) there is talk of buying debt at discount. Also as the plan is also covering debts in other markets, other than property, there will be offsets in that regard. Or have I got it wrong ?