As has so often been the case, when the financial crisis hit all the Very Serious People insisted something needed to be done and assumed that no matter how badly the Bush administration fucked things up, something was better than nothing.
That the execution of the bail-out has been extremely disappointing says nothing about whether it has accomplished its primary goal — that is, the prevention of complete financial meltdown. In fact, I think it has accomplished that quite nicely. Something did turn out to be better than nothing.
As Felix Salmon said the other day, we are now in the midst of a plain old, boring economic crisis. That’s plenty painful, of course, and it will take plenty of policy action to avert the worst potential bad effects. But it’s not an acute financial crisis, of the sort that might have wiped out whole swathes of the banking sector, saddling the government, via FDIC guarantees, with unthinkable costs, while destroying a couple of big international economies and generally sending us directly to deep recession.
Just look at the chart on this page to see the difference between where we were and where we are.