We're going to create a subclass of company whose ability to compensate their executives is limited by government fiat. So now, these companies are doomed never to be able to hire the best and the brightest, to compete in the arena for best executive talent.

No, Andrew, I don't think you think that's a good idea. If we have rules regarding executive compensation for ALL PUBLIC COMPANIES, fine. That works. "You want to pay your CEO obscene amounts of money, first take the company private." That's wonderful. But you can't have a two-tiered system of exec. compensation on the same playing field.

The notion that taxpayers are writing a "Pass Go, Collect Your Money" check to a bunch of Bad Actors is simply not true.

How did we get here? You take a bundle of loans – thousands of them – paying between, say 7% and 9%. You figure in an actuarial rate of default, say 6%, and arrive at a yield – say, 8.5% for the sake of argument. That’s a dandy return in the current environment, so hedge funds want lots of them. There's an almost unquenchable thirst for them; lenders are under a lot of pressure to make home loans to bundle, and brokerages like Bear and Lehman will lend money to the hedge funds until they're leveraged out ten-or-more-to-one so they can buy, buy, buy more bundles.

Then, horror of horrors, the actuarial calculations prove too optimistic because lenders are writing some incredibly shaky loans out there in order to keep feeding the monster. The default rate goes to 9% and the yield on the bundle goes to 7.5%. This wasn’t supposed to happen, Moody’s promised it wouldn’t; Moody’s hangs its head in shame as the Triple-A ratings go up in smoke. The collateral (the bundles) underlying all that leverage is suddenly of "unknown" value. The lenders (Bear, Lehman) want the borrowers (hedge funds) to come up with more equity (a margin call). The fund managers, looking at the direction things are taking and faced with coughing up billions, say, "No thanks, we’re out of here."

Now, Bear and Lehman and the rest of them OWN all these bundles the same way a bank owns a house in default. They own LOTS of them. And because of mark-to-market rules they have to carry them on their books at – what? No one knows the market value of the bundles because there are so many of them and people are panicking. Bear and Lehman and the rest have these bundles that are paying 7.5%, but in panicked market they have to mark them down so far on their books that it looks like they're holding Kryptonite, not a yield-producing debt instrument.

Okay, flash forward to today. The government is taking those bundles off the hands of the brokerages the way you'd take a cement block away from a drowning man. Good idea, right? And, to torture the metaphor, that cement block, used properly, has value. That's where the government's ability to "wait it out" comes in. Yes, the taxpayer is taking some risk, but the taxpayer is also taking over a HUGE number of mortgages that are going to be paid off over time. In fact, the majority by far of what the taxpayer is taking over will be paid off and those bundles will have a positive yield. The government might even make money on the deal, if they get the right prices at each end of the transaction.

But right now, today, the institutions that provide credit to our economy, especially the short-term commercial paper that is essential to the day-to-day running of American business – including even the big money-making companies – is frozen and needs to be unfrozen. Short-term credit is the oil in the engine of our economy. Without it, the engine seizes up and anyone who knows anything about engines knows that when it seizes you can't just put a oil in it and start it back up again. It's fucked.

So, as Paulson says, this is a regrettable circumstance but we have to fix it now or we'll all be living in the Stone Age in a month.

If politically the government had been able to do a "bail-out" a long time ago, things wouldn't have gotten nearly this bad. But because of everyone who doesn't really understand what's going on screaming "bail-out! The Bad Guys are getting away with it!" the government had to wait until things were REALLY bad before taking steps. The villains here are the hedge funds, who were allowed to take on WAY too much debt and were unregulated because in the old days, when they played with their own money and didn't leverage so much, they were seen as having no great effect on the economy. And yes, those hedge fund guys – some of them lost their income but some got to keep obscene amounts of money, and I wouldn't have a problem if they ended up in jail. But they are NOT the people who are being bailed out by this program. They're long gone. What’s getting bailed out are the financial institutions who lent them all that money.

And I hate to say it, but Obama is wrong this time. We can save the homeowners later, but if we allow the economy to grind to a halt, homeowners with bad mortgages will be the least of our problems.