One of the questions that I spent this week discussing is this: What was Wall Street thinking? Whether it's using taxpayer money to pay itself $18.4 billion in bonuses or to buy a $50 million corporate jet after posting $35 billion in losses, people are wondering whether Wall Street gets it. The answer is yes. Wall Street gets that nobody stopped it from paying bonuses when it took our money, so it took what it could. Unless we limit how Wall Street spends taxpayer money, it will keep paying itself big bonuses.

Wall Street is a place where the people at the top are trained to grab as much as they can out of the hands of the other graspers. At least $200 billion worth of TARP money went to Wall Street with no strings attached. If you put that much money into the hands of a culture that believes firmly in taking what it can get -- it usually pays half of its revenues to employees -- you end up with Wall Street taking as much as it can from the taxpayers.

It takes quite a bit to make our new president angry, but a New York Times report saying that Wall Street paid $18.4 billion in bonuses last year as companies teetered on the brink of collapse did the trick.

Speaking to reporters in Washington, President Obama seemed livid at the financial services industry. He called the payouts "the height of irresponsibility. It is shameful."

Wall Street might want to forgo bonuses for everybody. That's Obama's view and it is probably shared by the majority of the American people. Vice President Joe Biden told CNBC that he wants to lock up Wall Street bad guys.

Treasury Secretary Timothy Geithner already had to twist Citigroup Inc.'s (NYSE:C) arm to "change its mind" about buying a corporate jet. New York Attorney General Andrew Cuomo is investigating bonuses paid by Merrill Lynch before its acquisition by Bank of America Corp. (NYSE: BAC). Then, of course, there are the shenanigans at American International Group Inc. (NYSE: AIG).

The weekend is fast approaching. And with global markets in a tailspin --- the Nikkei fell 11%, the Hang Seng tumbled 7.1%, and the FTSE 100 declined 3% -- that can only mean one thing: Hank Paulson and Ben Bernanke will spend the weekend putting together another massive cash dump to announce by Sunday night. But I have a different idea -- for one weekend, how about a massive information campaign instead.

What if, instead of trying to fight fear and restore confidence with money, they decided to educate the world instead? If Bernanke is such a good teacher, perhaps he can put together an explanation for what is going on, why it happened, and how he plans to fix it. I think that a patient and honest explanation of what is really going on -- similar to FDR's fireside chats -- would go a long way to pushing away the fear.

By uttering meaningless platitudes about how "we have the tools" and "the economy will come back better than ever", the Administration is sending an unhelpful message. It is telling us a combination of things: it does not understand what is going on, it does not trust the American people to handle reality, and/or it believes that discussing the truth would make matters worse. Throwing more money at the problem without providing leadership does not seem to be working. Here are a few questions I think Paulson and Bernanke should answer for starters:

Let me get this straight: the Democrats are backing George Bush's $700 billion rescue plan that Republicans oppose. These are strange times.

House Republicans have many gripes with the plan. They are pushing to fund the recovery of financial services companies with private capital. Others are raising worries about the cost and the timing of the rescue. These are all valid questions.

Then there's the presidential campaign to consider. John McCain is threatening to skip tomorrow's presidential debates unless a deal on the bailout is reached. Maybe Republicans are throwing up roadblocks so McCain can swoop in and solve the impasse, looking presidential in the process. Barack Obama is also using this bailout for his political gain.

Meanwhile, Democrats are pushing for relief for cash-strapped homeowners. So far, they are not getting much sympathy from the Bush administration.

Treasury Secretary Henry Paulson recently said "the vast majority of foreclosures in this country ... are coming from people who either don't want to stay in their home, took out loans they couldn't afford as the result of irresponsible lending practices."

That's bologna, according to the Center for Responsible Lending, which says that the vast majority of people want to stay in their homes and could afford to if the courts were allowed to modify mortgages. Consumer advocates back the idea as do most Democrats. Bankruptcy judges think it's a good idea as well. The mortgage industry and some fiscal conservatives oppose this provision, arguing that it rewards people for making bad investment decisions.

The latest trend among pundits who want to look like they know what they're talking about is to assert boldly that the Fed's $700 billion purchase of dodgy mortgage assets no one understands or wants poses no risk to taxpayers and will surely make us money!

In an op-ed piece (subscription required) for The Wall Street Journal, Andy Kessler asserts that "My analysis suggests that Treasury Secretary Henry Paulson (a former investment banker, no less, not a trader) may pull off the mother of all trades, which could net a trillion dollars and maybe as much as $2.2 trillion -- yes, with a "t" -- for the United States Treasury."

I don't understand why, if that's true, Warren Buffett, George Soros, Wilbur Ross and Carlos Slim aren't diving in to make a bailout unnecessary. Warren's a nice guy, but I don't think he's passing on all those profits to taxpayers out of the goodness of his heart. Take the hint: taxpayers are not going to get rich paying artificially high prices for assets that the best investors in the world won't touch with a ten-foot pole.

Another thing to remember: we're buying the $700 billion in crap securities on the margin. We're borrowing the money because our federal government doesn't have enough cash to bail out a Subway franchisee without hitting up the debt markets. So any calculation about what kind of return we'll earn needs to include the hundreds of billions of dollars in interest we'll be paying for the privilege of buying those assets.

BusinessWeek offers an excellent critique of Treasury Secretary Henry Paulson's $700 billion plan to conduct a reverse auction of $13 trillion in financial toxic waste. But more importantly, it proposes a solution that could be just what we need to solve the problem -- recapitalizing the strongest banks and letting the weakest merge or fail. As I posted, such a strategy would not only solve the real problem -- a lack of capital -- but it would give taxpayers an equity stake in those banks. And that stake might be sold at a profit in a future economic recovery, helping us recoup our investment in this plan.

What exactly is the problem? Too much financial toxic waste and not enough capital to back it up. More specifically, financial institutions (FIs) holding the $13 trillion in mortgage-backed securities (MBS) and collateralized debt obligations (CDSs) only have about $340 billion in capital. So a 2.6% decline in the value of that toxic waste wipes out their capital. To estimate how much capital it would cost these FIs to write that down, I will assume that have already partially written it down -- to 60 cents on the dollar -- or $7.8 trillion. If its market value is even lower, say 20 cents, they would need to take a $3.1 trillion write-down to mark it to market -- leaving FIs with a capital deficit of $2.8 trillion ($3.1 trillion minus $340 billion).

Paulson's plan is deeply flawed since the reverse auctions -- which reward the FI willing to sell its toxic waste for the lowest price -- will either add misery to FIs or taxpayers. The FIs that sell toxic waste that's on their books at 60 cents on the dollar for, say, 20 cents on the dollar will be required to take a 40 cent loss. This will deplete their capital as I illustrated above and they will not be able to raise more.

At perhaps the most critical moment in his presidency, George W. Bush looked into the teleprompter tonight and warned the American people that very bad things would happen to the economy unless Congress passed the $700 billion bailout for Wall Street.

Kudos to Bush's speech writers. He explained the credit crisis fairly succinctly. Of course, he neglected to mention that his administration's opposition to sensible regulation laid the groundwork for the financial maelstrom. That's an issue, though, which will be debated by historians for decades to come.

Details of the bill are still being hammered out. The administration has agreed to caps on executive pay on firms who seek assistance. Some sort of plan to give taxpayers an equity stake in firms that the government helps also seems likely, according to a The New York Times.

The president had little choice but to reach across party lines because members of Congress were not buying the bill of goods being sold by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Paulson, in particular, showed remarkably poor political instincts by insisting that the bailout be approved as written. Whoever told him that Congress would give him a $700 billion blank check was crazy.

Meanwhile, the crisis is becoming the top issue of the presidential campaign. Republican John McCain today suspended his presidential campaign and called for Friday's presidential debate to be postponed. This is a stunt. McCain and Barack Obama do not sit on the relevant committees dealing with the crisis. Their presence in Washington will have little impact on the development of a deal.

Postponing the debates is an especially bad idea. The American people need to hear the plans McCain and Obama have for the economy. My colleague Peter Cohan points out that McCain has said many things about the economy such as "the fundamentals of the economy are strong" which he probably now regrets.

It's official: Main Street does not believe that Wall Street deserves a $700 billion rescue from Congress.

By a margin of 55% to 31% in a Bloomberg/Los Angeles Times poll, American said that they don't believe the government should "bail out private companies with taxpayer dollars, even if their collapse could damage the economy," according to Bloomberg News. That's a stunning rebuke to the Bush administration.

Though Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are thumping their chests demanding that Congress act immediately to head off the worst financial crisis since the Great Depression, members of Congress are not so sure. Senate Banking Committee Chairman Chris Dodd (D-CT) indicated to reporters yesterday that passage of the bill this year was not a sure thing. Maybe that's political posturing, but it should scare investors nonetheless.

Democrats and Republicans are getting hammered by outraged constituents questioning why the government should bail out sleazy Wall Street bankers and not lift a finger to help homeowners hurt by the credit crunch. The American people have nothing against people getting rich. They do resent those, however, those who they believe cut corners, which is exactly how Wall Street got into this mess. Anti-bailout sentiment is so thick you can cut it with a knife.

The administration is wasting Congress's time with all the testimony about "the crisis" and its need for $700 billion in our money. Free markets got us into the current situation -- the market adjusting after taking on too much debt. Let free markets get us out.

First, Paulson is new to politics -- though as Goldman Sachs Group (NYSE: GS) CEO he was very successful, such success does not always translate into Washington wins. He lacks the stagecraft needed to persuade Congress and the American people of his position. Simply repeating over and over again that Congress must pass his $700 billion plan now is not working. The world has not collapsed since he decided to launch his sales campaign. Every day that goes by with the world's financial markets still intact begs the question: "Exactly what is the financial crisis that Paulson is trying to stop?"

Granted, there is some fear priced into the credit markets, but less than there was last week. Fortune reports that Treasury bill yields are still low since investors piled into them for safety -- but those yields are higher than they were before -- rising from 0.03% last Wednesday to 0.83% yesterday. And the so-called TED spread -- the gap between 3-month Treasury and 3-month bank lending (LIBOR) rates -- remains wide -- 240 basis points (100 basis points = 1%). But that's down from 288 basis points last Wednesday. I look at this situation and do not see imminent collapse. Instead I see rational investors deciding that more debt will not solve a problem caused by too much debt.

Remember that old joke that a conservative is a liberal who got mugged? Well, maybe we can now say that a socialist is a free marketer who just got a $700 billion government bailout.

Lost among all of the talk about whether Hank Paulson and Ben Bernanke have become the new overlords of the American economy, is discussion about helping save homeowners from the Bush administration. All that was said is that homeowners want the U.S. Congress to pass the rescue bill quickly.

Democrats in Congress have other ideas. Sen. Chuck Schumer (D-NY) told Fox News Sunday that " we have to do something about the mortgage crisis, not just foreclosures but the price of housing."

Schumer makes a good point, but figuring out what to do is tricky. More must be done. The consequences of massive foreclosures are too big to ignore.

I have heard the arguments before that we should not reward speculators and people who bought homes that they could not afford. That sounds great if we lived in a free market utopia. But as the last few days have illustrated, the free market ain't what it used to be.

Global markets are soaring on news of a plan to bailout Wall Street again -- this time by creating a government entity that will buy up all the toxic waste on Wall Street's books. Yesterday, the Dow closed up 410 points on the news and this morning, Asian and European markets are up between 4% and 9% in response to the news, according to the New York Times. So, what is this plan and why is the market so happy about it?

At this point there's nothing much to the plan. The Times reports that stocks started to climb 617 points from their low during the day when Sen. Charles Schumer (D-NY) introduced a proposal to create a new government agency that would buy up the toxic waste on banks' books. The White House's anti-bailout crowd has already spent $1.1 trillion rescuing Wall Street so far -- this includes the $800 billion Lou Dobbs mentioned on CNN Wednesday night plus the $300 billion that the Fed injected into the market yesterday, according to the Times.

There does not appear to be much clarity on some fundamental questions: What kind of toxic waste will this agency own? Will it buy the waste from around the world or will it just stick to buying the waste from U.S. banks? How much of this stuff is out there? How much will the agency buy? How much will the agency pay? How much will this cost the American taxpayers? How will the agency raise the cash to finance these purchases? How will the agency sell this toxic waste to recoup the cost to taxpayers?