Playing Pattycake?***

| Tue Oct. 14, 2008 9:31 PM EDT

PLAYING PATTYCAKE?....The stock market was down today, but shares in banks that got capital infusions yesterday are up, up, up. The LA Times reports:

Investors' verdict on the Treasury's $250-billion plan to buy stakes in banks: They love it.

That may make taxpayers even more suspicious about these deals. If there was supposed to be some pain involved for shareholders in this partial nationalization, it's not showing up in the stocks. Of the nine big banks expected to get the largest cash infusions, most saw their shares surge today — the third straight advance — even as major market indexes slipped.

Sure, maybe this means less than meets the eye. Maybe the details don't matter, and investors just figure bailout = good and therefore it's time to buy. But check out this tick-tock from the Wall Street Journal about how yesterday's meeting at the Treasury Department went:

A final deal between regulators was hashed out in Mr. Paulson's office Sunday afternoon....The top bankers were then told to show up for a meeting Monday at 3 p.m., but were given few details. Expecting an uproar over the plan, government officials secretly planned to break off the first meeting, giving CEOs time to vent, talk to their boards, clear their heads, and reconvene at 6:30 p.m.

In Mr. Paulson's call with Morgan Stanley's Mr. Mack, the CEO asked the Treasury secretary the reason for the meeting, according to people familiar with the matter. Mr. Paulson responded, according to a person familiar with the matter: "Come on down, we'll tell everyone at the same time," adding, "I think you'll be pleased."

....U.S. officials argued the plan represented a good deal for the banks: The government would be buying preferred shares, and thus wouldn't dilute their common shareholders. And the banks would pay a relatively modest 5% in annual dividend payments.

The meeting ended at about 4 p.m. By 6:30 p.m., all of the [term sheets] had been turned in and signed by the CEOs. No second meeting was held.

It sure doesn't sound like the bankers put up much of a fight, does it? They've shown precious little willingness to sacrifice for the common good before now, so my guess is that they decided this was indeed a pretty good deal. Count me among those taxpayers who are more suspicious about this deal than I was yesterday.