My admittedly limited understanding of the situation is: Banks (and consumers!) made some dubious mortgages. Then financial services companies packaged up the

My admittedly limited understanding of the situation is: Banks (and consumers!) made some dubious mortgages. Then financial services companies packaged up the mortgages into derivatives that were bought and sold on the market as investments. Suddenly, someone realized that the component mortgages were not as sure as they thought; word gets around, and everyone tries to sell off the derivatives at once. This ordinarily would not be a big problem -- investments are expected to fluctuate in value -- except a lot of banks were holding the derivatives as assets. Banks are only allowed to lend out a fraction of their assets, and the assets are valued based on the price they can be sold. When the derivative market crashed, suddenly these banks couldn't lend out any money at all. At this point, the $700 billion plan made sense to me: they'd buy up the derivatives, propping up the market so that the banks could lend money again. But now I don't know what's going on... It sounds like they're just giving the money directly to the banks. Which by some arguments might make more sense than giving it directly to consumers: banks make loans to businesses. If the money is given to consumers, it might eventually find its way to banks and businesses through consumer spending, but it would take a lot longer, and banks and businesses might fail in the meantime. But it does feel like a big pie-grab, now.