I Won't Touch the Bailout Bonds

It's being reported that the Obama administration is working on a proposal to make the "opportunity" to "invest " in the bailout of banks available to the small investor. Apparently, the administration will choose a handful of fund managers to form Bailout Bond Funds that are sold to retail investors.

The motivation seems to be to preempt any new wave of anger or resentment on the part of the public, when down the line, they find out that a rich few (hedge funds) made handsome profits by investing in the "dirt cheap" toxic assets (low quality mortgage backed assets), while they shelled out their tax dollars to bailout the bankers and ended up losers.

My problem with this is two fold:

1. my tax dollars are already subsidizing these toxic assets. i don't think i need more exposure to this risk
2. more importantly, this is a good investment only if you buy the assumption that the toxic assets are grossly undervalued

#2 is the trillion dollar question: how do you value these assets? Are they really that under-valued?

Remember that we had a housing bubble, which means that the home values during the bubble were artificially inflated. Then the bubble burst. The market may be over-reacting a bit in the negative direction now, but it'd seem to me that expecting the values to go "back up" is stupid. That's just wishing for another bubble.

So, why would I rush to throw money at a bunch of sub-prime mortgage assets, which are highly likely to default, just because there may be a small discount?