A very useful hour

http://krugman.blogs.nytimes.com/2008/09/26/crisis-at-princeton/

Unless you already feel you have a good handle on everything happening in the financial markets and the general economy right now, this is worth watching. If you only have 15 minutes, Krugman starts at minute 38 and discusses the bailout specifically - but the first 38 minutes provide an important background.

(I guess you may also have totally thrown in the towel and moved to an entirely self sufficient farm in Oregon and thus not care anymore).

I continue to think that this is going to cause a significant retreat in the level / increase in price of leverage across the board and that this will flow through to create a decrease in the pricing of assets in all asset classes. (Except maybe gold). Even with a "bail-out", there has been a destruction of confidence in the effectiveness of the risk mitigation measures that made lending profitable at the price / leverage balance that existed 2 years ago. I would guess that this will move back up over time - but I would also guess that the initial (and now inevitable in my view) retreat will cause meaningful declines in earnings on assets first.

My interpretation of the first 25 minutes of the video is that NONE of the institutions that had made a business of lending have any room on their balance sheets to make additional loans right now. In fact, they are holding their collective breath waiting for additional losses on assets to cause their capital to further decline. I don't see this as likely to suddenly change even with the bailout plan. I also see significant likelihood of additional regulations on capital requirements that restrict the old way of doing business. Again - this means less leverage which means lower earnings on assets which means lower prices.