The Paulson bailout is a Cheneyesque power grab. It won't work and it will allow the Bush government to rob the country blind.
The Paulson bailout is the bluntest of blunt instruments. The only way it can work, according to Paul Krugman, is if the government wildly overpays for the toxic assets. And that means that the money, or at least most of it, will never be recouped. It's a $700 billion handout to Wall Street, and a handout that's totally at the discretion of the crooks in Washington - who still haven't accounted for billions that went missing in Iraq or the billions more that were given to friends in untendered war-related contracts.
In addition, the bailout addresses the symptom - the credit crunch - instead of the cause: defaulting mortgages. Even if they could fix the crisis of the moment, the defaulting mortgages are predicted to cause a series of additional crises over the next two years.
So what if, instead, the government put together a bundle of remedies that address the cause. For example:
* Purchase some perecentage of mortgages that are in danger of defaulting, and guarantee a low interest rate.
* Address the credit crunch directly, by making money available for loans.
* Instead of handing free money to financial firms, get stock in return (this is the "Dodd plan").
* Enact temporary emergency regulation to stabilize Wall Street. The problem appears to be that all the investment banks are trying to dump toxic assets at the same time. Stop that.
* Provide a big incentive package to help the middle class. Like the New Deal, this could hire workers to improve infrastructure. Or other, newer initiatives... think of it this way: we're thinking of spending hundreds of billions of dollars to fix this mess. With that kind of money we can do something more beneficial than making rich guys richer.