They will be unhappy if the Treasury or Fed loses billions on its loans.
They will be even more unhappy if the Treasury and/or Fed plus "private money" MAKE a lot of money buying toxic assets. Per the NYT, under the headline, "Toxic Asset Plan Foresees Big Subsidies for Investors."
The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks.
To help protect taxpayers, who would pay for the bulk of the purchases, the plan calls for auctioning assets to the highest bidders.
Assuming the reports are correct, private entities will put up $30 billion, the Treasury $120 billion, and borrow $850 billion. This gives the hedge funds, etc. 5 x 1 leverage. If they make money, it will be considered an outrage.
Get ahead of all of this by offering to sell anyone shares in the Treasury's $120 billion stake. For that matter, offer investors a chance to buy stakes of any/all the treasury bailouts at par. These have to be offered to retail investors in small lots.
I would include entities like Maiden Lane III in this.
Also include a fund of bank preferred stocks.
There are a few risks here. They may prove to be very popular and attract a lot of funds, but every dollar that the Treasury takes in can reduce their borrowing needs by an equivalent amount.
The other is that the investments will have a secondary market and there will be price discovery. A small price to pay to give everyone a chance to bet with the big guys.
They really need to get with it, or they will soon be in a no win position. It is so, so simple to eliminate this threat of a big give away to hedge funds -- by simply offering the same terms to individuals.