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Events on Capitol Hill are moving nowhere at breakneck speed. All of Thursday, congressmen zipped from one hastily arranged press conference to the next hastily arranged backdoor meeting, spreading mixed signals in their wake. By the time representatives filed out of the White House, there was a second bailout plan that emerged from nowhere, and we seemed to be back where we started. It was as if John McCain and Barack Obama's arrival had caused Congress to undergo meiosis.

The plan that some congressional Republicans have proposed exists more as a primordial soup than as an actual piece of legislation. It consists of seven roughly sketched bullet points that are relatively new additions to the debate. Some are inconsequential toss-ins like a blue-ribbon panel or a call for the SEC to review credit-rating agencies' performance. But some are radical departures from the plan that the Republican executive branch and the Democratic portion of the legislative branch agreed upon. Republican congressmen are taking a page out of The Wizard of Oz. After years of following President Bush blindly into the night, they've finally discovered the courage they always had but never knew about.

The Republicans in Congress would like taxpayer funds to stay far away from this plan. Instead, they want the banks that took on so many mortgage-backed securities to bail themselves out through an insurance system. The details are still sketchy-as most things are in Congress these days-but the Republican plan leans far too close to birthing a dozen new AIG-like situations. A polite reminder: The government had to bail out AIG just last week.

The pertinent Republican text reads, with emphasis added:

Currently the federal government insures approximately half of all mortgage backed securities. (MBS) We can insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets should pay for it. Treasury Department can design a system to charge premiums to the holders of MBS to fully finance this insurance.

A discussion of this sounds-good-at-first idea in a moment, but first an explanation of how the Bush-Democrat bailout plan would work. According to that path, the U.S. government would purchase up to $700 billion of mortgage-backed securities from banks. (It's still unclear how, but that's an issue for another article.) By doing this, the U.S. government wouldn't be insuring the assets-it would actually own them and could resell them at its leisure, even if that meant absorbing losses.

The Republican plan suggests that the assets should not change hands at all; it would be unfair to taxpayers to invite the odorous, decaying securities into the U.S. balance sheets. Instead, they want to leave the toxic assets where they are but have the banks insure themselves against any losses sustained from their prolonged stay.

The key word there is insure, and it should remind you of the process that got AIG in trouble. (We reiterate—enough trouble to force the government to bail AIG out.) AIG was in the business of providing "credit-default swaps." Basically, credit-default swaps are a fancy way of insuring a bond. Mortgage-backed assets are, more or less, bonds. So, if you're insuring mortgage-backed assets, you're at least in the same ballpark as issuing credit-default swaps.

Of course, issuing insurance for a bond is bad only if the insured defaults. This happened to AIG, which caused its credit rating to drop, which then caused other dominoes to fall. The Republican agenda appears to create an ecosystem of insurance, where everybody backs up everybody else's assets. There is a chance this could work, forming an FDIC-type insurance program where the banks pay the premiums. But as Daniel Bergstresser of Harvard Business School told The Big Money, it's a circular process. We already know the assets are failing, so why would we insure them? It's a sunk cost, and the insurance program would just be diverting that cost in a different way.

The mortgage-backed assets the Republicans would insure also have a chance of defaulting and can't be moved effectively until the market knows how much the things cost. That was one of the points of the Bushocrats' plan: to help the market discover a price for these semiworthless assets. The Republicans' bullet list doesn't speak to price discovery at all. So, if everybody is insuring worthless assets, they still won't get paid for the assets. This is the worst-case-but very possible-scenario. They may as well not even bother with the insurance plan and force banks to take full write-downs on the assets right off the bat.