(Just imagine the word "testicles" is inserted throughout if that helps.) But really really briefly, here's the main problems:
1) Banks own a huge volume of crap that no-one wants to buy, because no-one knows what it's worth. The value of this crap is fundamentally tied to the value of mortgages. In turn, the value of a mortgage depends pretty much entirely on how likely it is the home-owner is going to pay it off, which is itself hugely dependent on whether his mortgage is worth more than his house is. And when you realize that the housing prices are probably nowhere near their bottom yet,
you realize that all the dominoes are poised to collapse onto the supports of this financial house of cards, which is itself built on a foundation of shaky metaphors.
2) As the price of this crap drops, it forces some of the stupider banks who owned the most of it into bankruptcy.
3) Thanks to some
clever new derivatives
invented quite possibly by Satan, every financial company in the world is now extremely tightly tied together, so that if one bank goes under, every other bank may have to write down huge chunks of their own assets, pushing them closer to bankruptcy.
4) Banks then stop lending money to each other. This is partly because those other banks have recently developed a nasty habit of exploding messily, and partly because each bank is trying to keep as much cash on hand themselves to stop themselves from exploding.
5) When the banks stop lending money to each other, they stop lending it to us, which impacts our yacht purchasing power amongst other things.
What this last version of the bailout intended to do was take all that crap off the hands of banks, and put it in the hands of the government, who are of course adapt at handling fecal matter. It was hoped that would stop, or at least slow down some of the above chain reaction. Men and women in suits are going to argue about the failed bailout for the next couple days and try to hammer together a new version of it. But whatever form their efforts take, the ultimate goal of all this is to get a bunch more money into the hands of the banks, who, let's not forget, remain fuckers. And it's because these guys are such fuckers that this first bailout failed: no-one wants to give their money to these guys.
I have a solution however, based largely on the financial expertise I've accumulated from having read cnn.com for much of yesterday, and also my third year of college, where I watched just a ton of