> am not sure I understand the contradiction between various reports that Americans have been failing to save, and have been living on credit cards and recycled mortgages and other debt, and the panic of the banking industry. If there is so little savings in the nation, why is this such a profound high-RIchter shakedown?<

As I understand it (and I'm no financial expert - as an understatement) the problem in a zygote is that millions of Americans promised to pay money in the future, believing they would get rich in the interim. Those promises were sold by the promisees to essentially inncocent others. Now millions of people have learned they will not get rich, and have decided that they can't or won't pay that money after all. To a huge extent, the "innocent" investors get burned.

It is for this reaon that I think the simple phrase "privatize the profit and socialize the losses" is confusingly vague, and makes "bailout" sound more perverse than it actually is. It's not that the feds want to protect the rich bankers receiving their promised but-not-materializing funds so much as they want to maintain confidence in the American financial strucure, ESPECIALLY as to investors from outside the country.

It is for this reason that e.g the Bear Stearns bailout was structured to inflect maximum pain on the Bear Stearns principal shareholders, while absorbing the costs of backing up the returns to the innocent buyers (or, for difficult jargon, also where BS was a "counterparty.") Same principal probably applies to an insurance company such as AIG - they will want to protect the insureds more than the shareholders, and also protect the foreign investors.

It is the opposite, I believe, to Mexico telling American real estate purchasers "oh, sorry, those people should never have sold you that land, so we are taking it back," and on an infinitely larger scale.

If you want to locate and punish the evildoers, you should include telling your friends who are walking away from mortgages that they are putting a huge burden on your back (and on your children, as well.)