Morgan Stanley is even more skeptical of the PPIP than I am.  In a recent research note Richard Berner writes:

However, the PPIP is not a game-changer, in our view. In contrast with the securities program, the loan program is less likely to succeed. The gap between bank marks on these distressed assets and their economic value appears too wide to be bridged even by attractive leverage and FDIC-guaranteed financing. Moreover, while it is ambitious in scope, the plan lacks the scale needed to clean up balance sheets of leveraged lenders under any realistic stress scenario. And while the plan is scalable in theory, in practice officials aren’t likely to persuade Congress to authorize adequate funding.

Make no mistake, we view the overall PPIP as a positive step, and admit that our sober assessment could be too pessimistic. It’s worth recalling that officials have aggressively provided stimulus on three fronts: 1) the PPIP is part of the broader Financial Stability Plan, which includes the TLGP, the CAP and foreclosure mitigation; 2) credit and quantitative easing from the Fed; and 3) US$787 billion of fiscal stimulus. While the seemingly endless torrent of policy proposals has desensitized investors to their potential, we believe that the cumulative impact of those initiatives will eventually promote recovery. We have argued at length that fixing the financial system is the critical ingredient to getting policy traction, and the PPIP’s architects clearly hope that it will be sufficient to break the adverse feedback loop between credit and the economy. And by thawing frozen markets, it could create a virtuous circle of price discovery and allure to investors. Moreover, the Treasury Department appears to have done an effective job of pre-selling the PPIP to some very large investment funds who will be critical to its success. But we also see considerable downside danger: if the combination of financial and political constraints outlined above begins to bind, investors may fear that policymakers have run out of ammunition, and both markets and the economy would be at risk.