"This is the angry soil in which populist backlashes can take root."

Robert Reich gets the Political Economy of these bailouts right:

"The government is doing a lousy job helping distressed homeowners. And according to John Dugan, the Comptroller of the Currency, the little that's been done has had surprisingly little effect. Nearly 36 percent of homeowners holding mortgages whose terms were adjusted to give them more leeway defaulted on payments within three months, and almost 53 percent were behind on payments by six months.

What's going on? It's hard to know for sure, because the homeowners who have qualified for help so far were supposed to have been fairly good credit risks to begin with. My guess is the worsening economy is making it harder for just about all homeowners to pay their mortgages, and those who were teetering on the edge months ago -- although perhaps good credit risks before that time -- are now way under water. Two of the biggest culprits: Layoffs and fewer working hours. With far less money coming in, more and more people have to choose between paying their mortgages and trying to keep up with larger and larger credit card debt. They're trying to manage both while paying the medical bills and the food bills and energy bills, and they can't make it.

It wouldn't surprise me if many of these Americans were starting to look at the size of the bailouts of Wall Street and the bailout of the Big Three -- at the executives, well-paid professional employees, upscale creditors and shareholders, and even well-paid blue-collar workers, who are the major beneficiaries of this federal largesse -- and conclude that a fundamental principle of fairness is being violated.

These Americans aren't revolutionaries. To the contrary, they're deeply conservative. They've worked hard, but their hard work hasn't paid off. Some have tried to save, only to see their savings disappear. They're worried about the future and about their kids' futures. They never expected anything like this.

This is the angry soil in which populist backlashes can take root."

I think that this is the bottom line. A bailout of just the financial sector would be a political disaster, given how arbitrary and seemingly ineffective the actions taken so far have been for the general economy. That's why Felix Salmon was wrong about those figures of borrowers defaulting again. People expected that lenders would do more to help people than in normal times. As well, that's why the best argument for the Fannie/Freddie infusion is political. The Fed needs to be seen helping people in real life, as they see it.

I don't like big, fast, and clumsy political changes, and Populism leads to them.We need to harden the soil against such movements.