Talk about "moral hazard!"  We crossed that line a long time ago...the whole concern about rewarding people for their stupidity, rewarding corporations for preying upon stupidity and gambling with profits.  The "risk" part of the capitalistic equation has been removed...and as such, there is no more capitalism.   As we stare down the barrel that holds a bullet with the names of GM, Ford, Intel, Macy's, Nordstroms, Citi, HSBC, Amazon, et al, written on it...we have to quickly realize that we either bailout no one or bailout everyone.

We have already committed ourselves to a "U" shaped recovery in all markets because of the massive (although it will get even more massive) government intervention that is preventing a hard-bottom.  This will take years to work through, not months.  I firmly believe that it is not too late to take a huge dose of "Volcker" medicine and do what is right for our country, rather than continuing to do what is easiest.   In the early 80's, confidence in us Treasuries was faltering because of Carter's unwillingness to deal with inflation.  No one was buying our debt, in fact, countries that had been our lenders were dumping US Treasuries like a never before.  THE ONLY solution, was to jack rates through the roof to entice some investors back to the table.  It had devastating consequences that was painful for the economy in the short term, but ultimately saved our economy from a world confidence perspective.

The painful medicine that we now face, will be one that forces our economy to be less dependent on consumption and more focused on production, exportation, and infrastructure development and maintenance.  Companies must fail.  We no longer have a thriving buggy-whip industry because the Government did not prop up an extinct business category.  Many good folks lost their jobs...they had to find other work.  They had to learn other skills.  Life's tough, it's a lot tougher if you are stupid. 

Simply, from a consumption level, consumer "need" level, we have no use for 3 automakers making a product that is ill-suited for the world we now live in.  Other companies supply vehicles that are better, cheaper, and more fuel efficient.  Redundancy is not economically viable. 

Housing prices will fall to 1996  levels and more banks will fail as a result.  More hedge funds will implode, and median incomes will fall as well.  But the quicker we get there, the quicker we can recover.  Pain cannot be avoided. 

OR we can bailout everyone, billions and billions, yea...trillions...and we will never recover.  It will be an "L" shaped non recovery.  Forget about a "U" shaped recovery.