Let's break it down, what this comes down to is the over extension of credit. People bit off more than they could chew - morgages were sold, stripped, sold again and put into a pool of morgages and sold on the market, betting on the fact that the underlying morgage holder would stay solvent, continue paying the bills AND real estate values will only go up. Morgage backed securities were considered stable investments at one time and the big investment firms began investing in these pools, buying large shares of the mortgages to resell in their own funds. Low interest rate offers with balloon payments after X number of years were sold, without really examining the risk or the ability for that client to pay once the balloon payment came due. The people who bought were also betting the housing market would go up and they would be able to sell or refinance at the time of the balloon payment. That didn't happen, so you have defaults left and right, and investments (morgage pools) plummet, with them, the investment firm capital goes in the garbage. No cash flow or seriously stunted cash flow!
What does this mean to the average person if the bail out package doesn't come to pass?
It means money get's tight, even non-existence. Banks won't lend because they, themselves, can't borrow from other institutions. Without the lending flow, people will not be able to get loans for things like cars and college. But the worst aspect, that average Joe is not thinking about, is without short term lending, and banks will restrict short term lending in the same fashion as regular consumer loans, companies will not be able to maintain the cash flow they need to keep their operating budgets running.
That means jobs. Jobs go, interest rates sky rocket and inflation goes through the roof. The dollar will plummet and the mom and pop institutions will shut their doors, financial markets crumble and all you've got is chaos and anarchy.
And all this because of politics in Washington.
I think we should vote out every single sitting representative and put in new fresh, honest, every day people who fight for what we need and not what looks good on the record.