The question is, is this about saving banking or is it about repaying the investor class?

I am not an expert, but my hunch is that a key part of the problem was that people tried to treat economic rents as assets, and created imaginary "future assets". The stock market does this normally a bit. It tends to price shares partly based on future earnings, the expected earnings 6, 12, or more months out. But if you try to lock that in NOW, you have made a future profit into a current asset. If the stock underperforms, it creates a loss for you (and a gain for someone else, which is what makes it gambling).

One thing which drove the tech bubble was the idea that future profits could be huge, so P/E ratios now were totally irrelevant. Similarly "buying a mortgage" amounts to capitalizing the expected cash flow as if it were a real asset. People thought future profits could be huge, and some "smart" folks realized they could "assetize" cash flows and sell that.

This is what selling cash flows amounts to, locking in a gambling category error.

As long as things go as planned, you're fine. The transformation is transparent. But if you were counting on a given slope of prices or a given acceleration of profits, and you try to lock in a projection of that, your contract is extremely sensitive to shortfalls. What would have been a mere decrease in profits (but the asset it still producing positive rent or cash flow) turns into a capital loss for you, for instance.

And now the government is feeding hard money into this mess in part to make up for the loss of rents which were structured as assets and thus show up as capital losses instead of dried up cash flows. To make things worse the Fed is running an insane "quantitative easing" %brilliant% rescue plan, and the Feds are about to do a massive giveaway to the investor class who took those gambles.

Really, folks, we are feeding gamblers and crooks here and I'm getting tired of saying this!!

Get off the "bonus" distraction. Get onto uncovering more details about small fish like Stanford (circa $10B), Thain's bonuses (circa $3B), and Madoff (circa $15B net, I guess), if you won't tackle the big problems ($180B to AIG, and $100Bs more to others) and those who are, we hope, being smarter than they look at solving them.