I haven't really yet seen a basic macroecon explanation so i thought I might offer one, and no, contrary to most arfcommers and a lot of the 'internet-at-large's beliefs, the Federal Reserve doesn't outright own the country nor are they some mysterious boogeyman ready to enslave every man woman and child. The Federal Reserve, as a national bank, is a tool, just like any firearm except the Fed operates on a much larger scale. In the right hands, it can be a tool used to help supercharge this nation into an era of prosperity, but in the wrong hands....well, it should be easy to figure that one out.
Anyway, part of the whole bailout involved the Fed drastically inflating the money supply in this nation in order to buy a lot of .gov debt. They do this by, yes, simply pressing some buttons and creating more money. That IS part of their job believe it or not. Had the whole bailout not happened, monetary supply would continued on as it was however given the rapid realization that there was trillions worth of bad assets, credit would have tightened more than Xena, Seven of Nine and Starbuck's virgin cunts all put together. Like a couple others have said bankruptcies of some large companies likely would have happened, GM for example.
From a free market point of view with minimal .gov interference (which I personally subscribe to), this would have been good because it is necessary to flush the crap of bad business down the toilet so that some stronger company can come in with a better business plan and take its place. I'm all for that, but the problem at the time was that there was the potential for a LOT of businesses to go down that road in a very short period of time. With that much burden placed on our economy as a whole, could it have withheld the sheer numbers of newly unemployed, the drain on public assistance and keep going long enough for a new or existing business to come and help stabilize stuff? That process alone can take a couple years, minimum. I really don't know the answer to that one.
I don't really like Keynesian economic theories for the sole reason that it's practice is to advocate for .gov spending in times of economic downturn. The problem is I have yet to see any decent explanation of when the .gov stimulus stops, according to what indicators and under whose authority. If someone tried to answer that, undoubtedly they'd point to either the President, Congress, the Fed Reserve Chairman or someone on the NYSE, and therefore you will continue to have these problems.