By Jeff Diamond - All I can think when watching the Paulson hearing is that so much of this mess would have been self-correcting if our government had not bailed out all the bad players. AIG and some banks would have failed. Our government could have used that $700 billion TARP money to bail out the non-risk seeking depositors and policy holders. The surviving banks (and investment banks) would have gotten religion and reeled in excessive behavior while having had a less competitive playing field in front of them for the future. Boards of directors at all sorts of public companies would have become more activist to protect shareholders, and many CEO's would have been replaced by the boards (rather than all this questioning of the former Treasury Sec'y as to why the government didn't replace more CEO's.)
As it stands our government is doing everything within its power to maintain the status quo and put back the "broken" system that allowed this crisis to develop in the first place. Capitalism has been circumvented, and many of the correction mechanisms within a capitalist system have not been allowed to work.
In my opinion, our system is still sick. We are not well positioned for more than a temporary recovery. The cancer is still there. The government has essentially covered up the symptoms but not done anything to cure the patient. In fact, it is standing in its way of healing.