I did an analysis of possible impact of the Dodd and Paulson plans under loss fraction scenarios.  I'm very curious what comments people have and if there are any glaring errors (particularly on the dilution part, and the 125% rule, which I was not 100% sure about from reading the legislation.)

The idea goes like this.  The assets we are talking about are presumably the Level 3 assets of the large financials.  So I took the level of Level 3 assets of those companies from (http://econompicdata.blogspot.com/2008/08/level-three-asset-analysis.html).  (I excepted Fannie, Freddie, and AIG since they are accounted for separately.)  Curiously, the amount of Level 3 assets held by the top 20 companies sums to $755 billion, and as can be seen, holdings below that start to be chump change.  Interesting how closely that number coincides with the Paulson price tag...

I assumed Treasury bought up all of it at their current marks.  In both plans, if the securities sell above the price Treasury paid, that's simply a profit to the taxpayer. 

Suppose there is a loss on the securities, and for simplicity in the calculation suppose it's the same on all securities.  Under different loss fractions, the total loss to the taxpayer will differ in the two plans.  In the Paulson plan, whatever the loss is on the sale, is the loss to the taxpayer.  The Dodd plan, however, has an equity-stake backstop.  As I understand it, the backstop is for 125% of the difference between paid price and sale price (i.e. 125% of the loss.)  This equity stake dilutes the preexisting equity, so I assumed the government would immediately dump the equity into the market, thereby receiving Stake * (Market Cap / (Market Cap + Stake)).  So this quantity was calculated firm-by-firm, using the Level 3 assets of the firm as of August and their current market cap.

The Dodd plan has the feature that the taxpayer sees no losses until the securities lose 13%.  Note, of course, that the calculation uses the same loss rate for all securities of all firms. 

The results:

Loss        Paulson        Dodd
Severity        Cost ($BB)    Cost ($BB)
-----------        ------------    -------
100%        755        361
75%        566        227
50%        378        110
25%        189        23
13%        90        0

You can find a copy of the spreadsheet I used to do the calculations at sites.google.com/site/adflevel3calc/excel-sheet