One point Paul Krugman makes here is that the terms of the bailout were sharply constrained by the political strategy chosen by the Democrats. When Pelosi and Reid decided that this bill would not go through without Republican votes because Democrats would not be demagogued for cleaning up the mess caused by deregulation, they took more sharply liberal options like nationalization off the table. And they put crazier options -- like the House Republicans reinsurance package -- on the table. Politically, that may have been the right move. But it entailed a fairly major tradeoff in the substance of the bill. One could have imagined an alternate world in which Democrats made the bailout package their own, rammed it through the House with few Republican votes and tried to leverage Paulson's desperation to convince nine Republican Senators. There's no guarantee that that would have worked, but a strategy starting from that place would have ended with sharply different substantive and political outcomes.
