Instead of giving bailout money directly to the banks, which then turned around and bought other banks (like BofA buying Merrill Lynch), I'd have used the money to buy down peoples' mortgages. My reasoning is that people bought homes at $200K setting a market value of $200K for homes in the neighborhood. When some got foreclosed, the banks liquidated them for $100K, setting a market value of $100K for everyone else and making it near impossible to sell, leading to more foreclosures. Why more foreclosures? People see a $150K (that's being generous on the down payment) loan on a house worth $100K so they walk, making the problem worse. If the bailout money had bought down those mortgages by $50K, it'd have made the homeowners whole, the banks don't lose the $50K reselling the homes, and the banks actually get the $50K anyway (buying down the loans).
I fully agree with loaning corporations money. It means short term debt that gets repaid fully, though there's risk that the companies go under anyway. That is an investment of the public money, since you expect those companies to continue to keep people on the payrolls and you expect the economic downturn to reverse at some point.
I fully agree that the long term structural deficits are a grave threat.
