One of the things to watch for tomorrow when Geithner unveils the new bank bailout is whether the range of asset-backed securities (ABS) eligible for some form of government help is broadened. The Fed already announced a significant expansion of the Term Asset Backed Securities Lending Facility (TALF), with eligible collateral now including triple-A rated ABS backed by student loans, auto loans, credit card loans, and SBA-guaranteed 7(a) and 504 small business loans. There are rumors that the TALF will be expanded again tomorrow to include CMBS and non-agency RMBS, which, depending on the terms, could dramatically increase the use of the TALF. It could also, by the way, dramatically increase the risk the Fed is taking on. The public-private bad bank will also presumably accept various forms of ABS, and potentially even CDOs. The point of a bad bank is, after all, to remove the "toxic assets" from the banks' balance sheets, and CDOs are nothing if not toxic. Somehow I doubt that synthetic CDOs will be eligible, but I guess it's possible. The point is, the new plan may very well end up being a bailout for structured finance.