The whole system is interconnected in a lot of ways, and the damage that was done by defrauding people with toxic mortgage backed assets (as well as convincing people to take mortgages they couldn’t afford to create more mortgage backed assets) was real damage that needed to be repaired. I feel like the bailout instead just kept everything as normal as possible. It strikes me that a huge amount of nominal value was lost when the housing market collapsed, and the effort ought to have been in preventing that nominal loss from turning into real loss (e.g. foreclosures which take a productive asset [a roof over a family’s head] and turn it into an unproductive one [an elaborately decorated vacant lot]). The problem is that when stocks collapse, the money is extracted from the mouths of the poor, not from the high scores of the rich. I’m not sure I know what the right solution was, but I think the bailout was a transparently bad one, and that it worked out badly.
