There are some serious inconsistencies in the plan. It proposes to buy Asset Backed Securities (not just mortgages, but auto-loans, student loans, credit card debt) at above market rates posited on a hold-to-maturity rate being higher. This seems to me to be nonsense - the market has prices these ABS at the rates they are at to hold-to-maturity level - that is what markets do, price the value of something.
So in effect, the Fed Reserve will be buying ABS at above market level from certain institutions. This will result in two prices for these assets, the Fed price and the actual market price. If you cannot sell to the Fed, you have to sell to someone who can. They can then make a profit on turning around and selling to the Fed.
As has been pointed out by a number of US senators and 190 US economists, this benefits only those banks who will be the conduits for this. All other banks - the banks that do the financing of main street, as opposed to Wall St., will take their lumps as will the US taxpayer.
700 bn is also a drop in the ocean. Jut on mortgages: 3.2 trillion of US mortgages were securitized in the last few years (I believe). The value of those mortgages is likely to fall 35-40% if house prices in the US revert to long-term trend. This indicates that just the mortgages of the last few years will incurr losses of 1-1.2 trillion. And that is before all the other ABS is considered.
Add to this, it does nothing to help the consumer in the US - the root cause of the problem is that Americans are up to their oxsters in debt. 70% of the US economy is consumption, so without doing something to fix the spending power of the consumer, there is a dramatic realignment of the US economy about to take place.