Haunted by the Bailout

The treasury secretary touts TARP as a success but it doesn't seem that way.
Local, state and federal government debt has skyrocketed. Consumer spending is down. Unemployment is high. Paul Krugman of the NY Times predicts we are in the third Depression. Gold is at an all time high. Home foreclosures are on the rise. The DOW is mired in misery below 10,000.
The financial crisis of 2007 & 2008 was an economic shock. Specifically it was a demand shock. Accepted macroeconomic theory says that the economy should tend back toward equilibrium. If the economy operated as smoothly as the simple model that might be the case. In reality demand was already artificially created (think housing bubble) prior to the shock and what we are witnessing is the economy moving towards pre-shock equilibrium. Since this is lower than equilibrium with artificial demand levels we observe the aforementioned economic indicators.
In addition the economic shock , due to it's severity, exposed a vast number of inefficiencies in the marketplace and overall economy. This is termed commonly as creative destruction (Joseph Schumpeter). Business models, investment theory, economic theory, fiscal & monetary policy and more were all found to be flawed and / or wanting.
That's a good thing because efficient markets are to be desired.
The bad is that moral hazard was far exceeded by the government in it's efforts to correct the shock. More not less failure would have strengthened the country going forward as it would have flushed incompetent managers and corporate entities from the business landscape.
It is important that failure is not rewarded in an incentive based system yet that is exactly what happened.
Failure was rewarded and corporations already too big to fail were allowed to become larger.
In the end the treasury secretary said breaking up the banks was simply , "too hard and complicated." That phrase alone typifies the lack of direction we have as a society and how it is that Samuel Huntington could speculate that the country may very well disintegrate in the the near future.
Supposedly core ideals of free markets gave way to crony capitalism. What better way to generate jobs, spur innovation and prevent the public accumulation of private debt than to split large banks into regional banks saddled with debt and in need of employees?
That was too hard; much easier to insulate the wealthy against the harsh lash of the market that whips the backs of the poor every day.
There is something to be said for merit if one appreciates quality over privilege.
There is much to be said for low barriers to entry to markets as well and how this was forgotten when those who currently held the keys were threatedned by their own folly.
Poor economic indicators are easily fixed but there must be the moral capacity existent by policy makers to do so. That lack of moral capacity is what will haunt America the most.