This has been talked about before, but just to remind you in the hail of disinformation that's been going down the pike...
The problem that started the cascade of financial failures in Oct 08 (keep in mind that october is almost always when stock markets crash, in a year that they are going to) was the packaging of securities out of bad mortgage loans.
When the term "bailout" was first being thrown around, lots of people had the idea that maybe they'd make the bad assets good by helping people pay back their mortgages. This would have had a leveraging effect that would have reflated the market by making the packaged securities at each level of derivation "non-toxic" again.
Instead of doing that, they just gave the money straight to the banks. When pressed by the media, Paulson (may he rot in banker's hell) said specifically that he had no interest in using Tarp money to help mortgagees with their loans, even though this would have cost less in the long run and had the desired effect of fixing the derivative collapse.
Of course we all remember that when AIG got their bailout money they used it first and foremost to pay bonuses and to give their execs a nice trip to the bahamas, right? When called before Congress, they expressed no remorse, and did it again later when the heat died down.
Now I hope you've been following the trail to Goldman Sachs lately. If not you can go read some big long essays by Matt Taibbi that basically lay it all out.
So now, recently, the Vice Chair of Goldman Sachs International said the public should "tolerate the inequality" of large bonuses to bankers. "If we said we're not going to have as big bonuses or the same bonuses as last year, I think then you'd find that lots of City firms could easily hive off their operations to Switzerland or the far east"
It wasn't a bailout, folks. It was the biggest case of fraud and graft in history. It was raw theft. They could have fixed the impending collapse and saved a lot of people's mortgages, if they wanted to.
But that was never the plan. Besides, the worse things get for all these ex-homeowners, that will help prevent price inflation, allowing these guys to cash out their stolen money into various protected asset classes before the currency collapses. They WANT lots of poverty. It directly improves their bottom line.
If we wiped out poverty tomorrow, there would be a massive "economic collapse" from price inflation and wage costs. Of course it would only be a collapse for the crooks. For the rest of us, it would look like prosperity. I'm not saying that inflation is good here, what I'm saying is that the money has already been inflated, it's just almost all going into the hands of the super-rich.