BitchPhD has two excellent explanatory posts up on the bailout. The first is an IM conversation with a smartypants understander of economics expanding on the question I asked last Friday, What The F Is Going On WRT to this hubbub. Because the conversation is written in IM, I've tried to streamline and clean up the part I'm quoting here, and I hope bitchphd doesn't mind my wee edits. But the convo is worth reading in its entirety, especially the bit at the end that I'm about retirement as a feminist issue.
Even if you want a better system than the one provided by capitalism and its banks, you need enough time to put that system in place. I.e. you need enough time to get solid, otherwise profitable companies used to the new way they will be expected to get debt (or in a more extreme case, more time to get rid of their debt) (i.e. pay it off). The fundamental problem here is one of speed. You might be able to build a better system than our current version of banking and you might even be able to find a better system than capitalism tho no-one is entirely sure what it is or how it would function but you cannot expect to have that system ready by Monday morning. So, unless you want a huge number of real, solid, profitable businesses to go bust and, by extension to stop employing people you need to rescue the banks now and then hold your debate on tweaking / revolutionising our economic system. The 700 billion is only partially meaningful. It's really a code for "so much fucking money, of course it will work" in order to buy time to have the discussion you really want to have which, I believe, was Paulson's plan all along. The rumour in the specialist press was that the day he announced it the problem was about to spread to the money market funds i.e. one step beyond the banks into the "conservative" part of the financial system, at which point it would have been almost impossible to stop the panic. So IMHO you have to pass the bail out NOW, help low income households real soon, and worry about a few people on Wall Street when you have time, e.g. launch a really nasty criminal investigation into the extent to which they committed fraud but do it in a year or so.
I am surprised they failed to pass anything, and even though the bill the House voted down was badly flawed, I do think the longer Congress waits, the longer they undermine their claims of urgency, the longer they push out any eventual compromise, and the more significantly they magnify the potential fallout. There is truly a shortage of big kid knickers in DC today. A bunch of bad solutions, but worse is that no one can agree to one of them.
The second BitchPhD post I'm linking is actually a followup post by the smartypants understander of economics quoted above, giving some more explication.
