My unsophisticated thoughts on the bailout

I'll steal Lance Mannion's line on this one -- remember while reading this that I know less about the economy than even John McCain. But this is my simplistic understanding of the "crisis":

The main concern seems to be that without this bailout, there would be a contraction of credit. "Credit" is a financial term that means "getting money from people by promising to pay it back with a little extra". The reason it's getting harder to get credit is that a lot of other people who got money from people by promising to pay it back with extra clearly won't be paying it back. The problem is, these people -- subprime mortgage holders -- were the first level of a byzantine chain of fiscal stunts such as mortgage-backed securities and company paper that are all designed to make it easier to get credit. In other words, for a long time it was really easy to get money from people. So easy, that our economy adapted to the point where it expected that money was pretty much out there for anyone asking for it.

Now we find out that giving money in return for a promise and a wink isn't such a good idea. And we're being told that unless the government replicates these idiotic business practices, credit will tighten up. That is, credit will smarten up. This means that in addition to learning from the stunts that have failed, it may also ignore the stunts that still seem to work.

So rather than go through the pain of the economy adjusting itself to a smarter attitude toward extending credit, we're making more credit available from the government because everyone is too used to doing it the stupid way.

It makes me think of an analogy (I think best with analogies).

Imagine you have a large party boat. You want to throw bangin' parties on this boat, so you load it up with a great sound system, well-stocked coolers, and a satellite dish tv system. Problem is, all that weight causes water to slowly enter the boat. So you also buy a pump to bail out all the water coming into the boat so it doesn't sink.

Well, the pump fails. Now, most people would lighten the load. Sure, it might bring down the party a wee bit to have three kinds of light beer rather than four, but isn't three really enough? Isn't a great party still acceptable?

The government today said no, handed us a bucket, and said "start bailing".