One thing I learned from the Balance Sheet in the financial statements is that the responsibility (Liability and Equity) and rights (Assets) should be kept in balance. The bailout plan by the Bush Administration intentionally avoid put responsibilities on the financial firms shoulder when handing over the rights of using detoxified capital (for the purpose of encouraging auction participation). This is why people don't feel its right.
Why not to use a complete override plan and mandate every institution that holds toxic assets to participate the auction. How much different is there between a partial market bailout and a complete government takeover bailout? The later may be more reasonable and effective for now and the government can release the tight control of financial institutions after the housing market recovers. Since everybody already agree to reform the financial system, why don't the government just do it now: cap the executive pay, setup renegotiation rules for the home owners facing foreclosure and order the banks to conduct business viewing each other as a government owned entity until the conditions get back to normal. This way will set a good precedent to deter future moral hazard since the CEOs will know that if they again recklessly take risk and put the whole financial system on the edge of total collapse, they will be punished by the government in a ruthless manner so as for the shareholders of these banks and future shareholders of banks will watch carefully on the risk-taking behaviors of the CEOs. "Hank" is simply too nice to his old buddies.