The economic details and their consequences are very well explained here in Asia Times, and also here in Money Morning. Plenty of economists have warned against this folly, just as they warned against the Smoot-Hawley Tariff in 1929, which Congress passed and Hoover signed in 1930, helping to turn the rough times of 1930 into a whole new thing in 1931 and 1932.
From a simple theological standpoint, the problem is this, as almost all average Americans understand, and which only the best and the brightest don't get:
It robs the poor in order to give to the rich - for which the Bible promises you will come to poverty - and what's even worse, it punishes the innocent in order to reward theft. This paper being foisted on the taxpayers has become crap because the underlying assets - mostly houses so far - have lost their value and can't be sold. Since nothing is being done to keep people from being thrown out of them, they're going to keep losing value, because one foreclosure promptly drops the price of all other houses around. People who are getting thrown out of their houses, or fearing that they will be, don't buy things, so businesses who can't sell anything will fire their workers, who in turn will fail to make their payments and will get thrown out of their homes.
Robbing these people so that rich thieves can keep their millions does nothing to stop this downward spiral. What would have worked is to protect the homeowners involved by forbidding foreclosures, seizing and liquidating irresponsible institutions and using their assets to defend common people from financial ruin. Such people would be much more likely to buy things, and that would actually help the real economy, even though there might be a crash in the yacht market.
It should be obvious that this bailout, which even if it were sound in principle is grossly underfunded for its stated purpose, is a calamity. By further wrecking the real economy, it will do to us as the Smoot-Hawley Tariff did in 1930. This turd got through the House of Representatives because Barack Obama pressed the Democrats hard to vote for it. He deserves to become President to reap the storm whose seeds he sowed last week.
Here's why ridiculous mortgages were written in the first place. The people lending the money knew it didn't matter whether they'd get paid back, because they'd have the loan sold and out of their lives in less than a month. The kickback to us who got these at the time was being able to get mortgages we weren't qualified for at lower rates than made any sense in view of the risk that somebody somewhere was going to eat, so we all liked it at the time. It was easy to overlook the really grand thefts of our lenders, because, as the proverb says, "A bribe blinds the heart."
"He that covers his sins shall not prosper, but he who confesses and forsakes them will find mercy." This is a good time for all of us to consider our ways, because if not, those ways will bite us some more in the coming days as we continue in them.
To lend money recklessly because you don't have to worry about getting paid, passing the risk off on someone else by lying about it, is simply theft. To make the taxpayers buy that crap is to do more of that same theft that made the problem happen in the first place. Banks and speculators around the world stuck with this trash because they aren't qualified to be bailed out can now sell it to those that are, who will then cash it in at Uncle Sam's Bank of Sugar Daddies and Suckers, draining even more money from the real economy. Massive government borrowing to finance this nonsense will dry up credit for all other entities, thus actually worsening the credit crunch in the end.
The scripture is true: "He who robs the poor, and he who gives to the rich, both alike will come to poverty."