The Bailout Unintended Consequences Commence
The first unintended consequence of the bailouts are of course the "wait and see" reaction people in the financial markets have, which has put the cabash on liquidity. Commercial finance, e.g. those without big collateral to pledge for big deals, is just on-hold until the government decides how to unravel everything. The same 'wait and see' unintended consequence of expectations uncertainty applies to the stimulus, people who would otherwise be doing investment and production in a sector are waiting to see what kind of special grants and subsidies they are to get from the 'stimulus' as it makes its death march from policy to implementation. Instead of allowing the interbank trades to just clear (at an orderly loss-making process), the bailouts and expectations of future bailouts mean that the banks and other financial firms don't have to take the losses like they should have to under rational markets where people are rewarded for their risk and suffer their losses.
So what happens then, the government buys the bad paper, then turns around and sells them at a loss. So it is the taxpayer who takes the loss, and the financial markets freeze while the government policies wind their way through the system and this affects production and jobs. It's all so painfully obvious yet the bailouts and stimulus packages continue. (So much for 'change'). There are banks buying the 'junk' from the government now and making big money. This is what should have happened in the market months ago without the Fed, Treasury, and FDIC acting as loss-leading middlemen.