The biggest issue with the "bailout" package has always been that no one could explain what the true problems with the financial sector are, nor could Paulson explain how the bailout would solve the problems. After hearing more and more about how its not the mortgages that are the financial industry problem, but the issue of credit default swaps and collateralized debt obligations, which relate to the mortgages, I am feeling more and more that the swaps and the CDOs were nothing more than the largest pyramid scheme the world has ever seen. The swaps apparently represented insurance contracts, where the purchaser of the swap, bought the right to receive an income stream (a "PMI type of insurance"), but, required that investor to pay out on the "policy" if a loan or package of loans or package of CDOs went into default. The CDOs were again merely sales of income streams, backed by many different mortgages (and possibly other types of collateralized loans). It seems that Wall Street merely packaged the loans, and used them to borrow money from investors, promising that if they did not pay back the money, the investor could then seek to recover against the collateral. Wall Street could then re-sell the collateralized loans to a third party! Same thing with the swaps. Wall Street underwrote various types of loan insurance (without being licensed to do so, and apparently, without the requisite knowledge to be able to do so in a proper manner), then sold the income stream from these insurance policies to unsuspecting investors! Instead of giving all this money to these banks (and AIG) in order to prop up their outsized obligations that they never had the ability to cover, we should probably be throwing the lot of them in jail!