Why not let the financial institutions fail? They made bad decisions, and the free market will take care of it. The ones that survive, survive. The ones that don't, don't. Survival of the fittest. More over the fold.
As I understand it, the bailout would cost every U.S. citizen thousands of dollars.
Why not cancel the bailout to the financial entities, and then give the money directly to the U.S. citizens?
Since most people aren't saving money anymore, it will likely go right back into the economy...for food and energy and healthcare and childcare and things that actually help main street.
If the lack of a bailout to the financial institutions causes a recession, then hopefully a stimulus of several thousand dollars to each U.S. citizen will be enough to kick us right back out of recession.
While I'm not an economist, I think my idea is just as good as Paulson's idea.
; )