Maybe the real outrage is the covert second bailout to Goldman Sachs, Bank of America, and other investment houses that were AIG’s trading partners. And maybe there’s more fury to come this week, when the administration rolls out its new plan to provide subsidies to private investors to buy up toxic assets from banks.

First, on the covert bailout, Joe Nocera at The New York Times summed it up this way:

There is a much bigger issue that has barely been touched upon by Congress: the way tens of billions of dollars of taxpayers’ money has been funneled to A.I.G.’s counterparties — at 100 cents on the dollar. How can it possibly make sense that Goldman Sachs, Bank of America, Citigroup and every other company that bought credit-default swaps from A.I.G. should be made whole by the government? Why isn’t it forcing them to take a haircut?

What’s worse, some of those companies are foreign banks that used credit-default swaps to exploit a regulatory loophole. Should the United States taxpayer really be responsible for ensuring the safety of European banks that were taking advantage of European regulations?

Yves Smith at Naked Capitalism made exactly this point earlier this month, when AIG’s rescue details were becoming clear:

Bottom line: covert subsidies were given to bank via AIG. Remember, Henry Paulson, who had perilously few inhibitions about shoveling money at banks, even when the pretexts were often dubious and the checks non-existent, nevertheless was afraid to overpay openly for dud assets, which is why he retreated from his original conception of the TARP as as way to hoover up bad debt.

But AIG? No problem. CDS are arcane, and these were bi-lateral contracts (while the dud TARP asset were in most cases securities, so in many cases, third parties could formulate a rough view as to where they might trade).

Wake up and smell the coffee. The public purse is being looted and we the great unwashed are being fed pablum. Just because the perps work for once esteemed institutions and are typically treated with deference does not change the nature of the undertaking.

It was the AIG bonuses that first aroused populist rage, with the lavish homes of the bonus recipients an easy and convenient target. Now, it seems, more details of the AIG rescue are coming to light, with more reasons for anger. And just wait until Treasury Secretary Timothy Geithner formally unveils this week the administration’s plan to buy up toxic assets from banks. AIG bonus outrage, I think, will be supplanted by mounting unhappiness over who, exactly, we keep bailing out: Unsecured creditors and private investors, apparently.

Some details of the plan leaked over the weekend. Yves Smith called it “a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for crappy paper.”

Paul Krugman went ballistic:

To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.

I guess the best that can be said is the plan will at least take some attention away from anger over the AIG bonuses. But it won’t stop the questions about our government’s generosity toward AIG’s trading partners — or why the government is going out of its way to subsidize private investors.

Obama tried to allay concerns about the financial bailout plan, saying it was essential to avoid a “crisis from turning into a catastrophe.”  Reminding voters that he will return to Washington after the rally to vote on the bill, Obama urged Congress that “the time to act is now,” drawing only weak applause.

“If we do have losses, I’ve proposed a Financial Stability Fee on the financial-services industry so Wall Street foots the bill -– not the American taxpayer,” Obama said to a smattering of applause. It’s a new line in his stump speech, responding to criticisms that taxpayers could lose most of the $700 billion invested in a bailout.  “And as I modernize the financial system to create new rules of the road to prevent another crisis, we will continue this fee to build up a reserve — so that if this happens again, it will be the money contributed by banks that’s put at risk,” he said.

Obama also promised to cut federal spending by targeting tax loopholes, applying “pay as you go budgeting” like President Bill Clinton, and ending the war in Iraq — a pledge that drew the loudest applause of the morning.

Turning to taxes, Obama asked for a show of hands of who made less than a a quarter-million dollars a year. Facing the nearly unanimous set of hands, Obama pledged to cut their taxes, and urged them not to listen to false advertising that said otherwise.

In his closing, Obama recounted great moments in American history, from defeating prejudice to overcoming the Great Depression, and likened those moments to the prospect of rescuing the economy and winning the election.

Compared to the events I’ve seen Obama do this week, this speech sounded rushed and brittle.  The campaign rescheduled an afternoon trip to Michigan, in order to give Obama the time to fly to Washington and vote on the bailout; and an aide said he may do some TV interviews on the topic this afternoon. So Obama may have the rest of the day on his mind.

There’s more riding on his performance in Washington than on a stump speech in Wisconsin.

Ron Kind, a local star who had held every post from high-school quarterback to county prosecutor before being elected to Congress in 1996, ripped into Sen. John McCain as an economic lightweight who could not handle the “3 a.m. phone call” from Treasury Sec. Henry Paulson Jr.

Rep. Ron Kind (WI), co-chair of the New Democrat Coalition, attacked Sen. John McCain at Obama's rally today.

Kind is not usually a partisan attack machine, but he slammed every step of McCain’s response to the financial crisis.

First, Kind said, McCain claimed the fundamentals of the economy were strong — an obvious first strike. Then, the Republican nominee proposed a commission to study the problem, and hastily called for the (impossible) firing of the SEC commissioner — Kind labeled these strikes two and three. The morning crowd roared its approval.

Kind also advocated for the bailout bill — Obama is due to fly back to Washington to vote for today — saying that despite understandable anger “back home,” it was crucial to get the economy moving.

Obama’s supporters, literally overflowing one of those small-town “Main Streets” we all keep hearing about — were silent on that point.

Strolling off his plane with cell phone in hand, the Democratic presidential nominee looked calm as he arrived in Nevada today, walking around the tarmac in deep conversation for several minutes.

Obama arrived in Reno, NV on Monday evening.

Aides did not say who was on the line when Obama touched down, though they had been quick to announce his calls with Treasury Sec. Henry Paulson Jr. and House Speaker Nancy Pelosi earlier in the day.

When the call ended, Obama walked toward an SUV with his press aide Robert Gibbs, and stopped briefly to take a question from the press.

Jeff Zeleny, a reporter for The New York Times, crouched near the motorcade and asked for a response to McCain’s latest attack — that Obama was “injecting politics” into the fight over the bailout.

Obama said he had already addressed the issue in his speech on Monday, and he pledged that he would have more to say tomorrow. This is a campaign, so that promise is pretty safe.

Obama also yelled back that he’d learned not to take the bait — though that’s not an exact quote, and I’m not sure what it means anyway. (McCain’s bait? Zeleny’s?)

The exchange ended there.

It was not enlightening, obviously. Except for perhaps reinforcing Obama’s uber-deliberate approach to every step and message during this period of economic anxiety. Then the motorcade whisked everyone off Reno’s Grand Sierra Resort and Casino, which promises guests “80,000 square feet of heart-pounding casino action 24 hours a day.”

It’s just the spot to make up for those 401(k) losses.

“While things are never smooth in Congress,” Obama told voters as soon as he took the stage, “understand that it will get done.”

Then Obama boiled down his simple message for Congress: “Get this done!”

Obama called for calm as Congress struggles with reaching consensus on a bailout — a mood that is not felt in the markets today — but also repeatedly told voters it was an “outrage” that the Republican “philosophy” of deregulation and trickle down economics has led to this avoidable crisis.

Obama depicted the bailout’s road through Washington as tough, but eminently doable. “It’s sorta like flying into Denver,” Obama told voters to wide applause, “you know you’re going to land, but it’s not always fun going over those mountains.”

Obama also apologized for appearing late at the rally, explaining that he was on the phone with Sec. Paulson, Speaker Pelosi and congressional leaders.

Confidence aside, Obama did not offer a specific plan for how the rescue plan could recruit more support — from rank and file members of Congress or the many Americans who oppose the proposal.