“Investors” perceived that the value of stock, which had been inadequate at sustaining profits, was less attractive when this point was proved irrefutably by the need for a bail out.

“Corporates and companies” are so denied capital, to invest in resources and labour. Observation that other corporates and companies are experiencing similar insures the onus to raise such capital remains low (e.g. by sale or paying higher interest rates).

Wages do not rise. The purchasing power of “employees” (and so consumers) remains depressed and so does the outlook.

All sounds pretty rational to me.

I wonder if in the past the bail outs worked better when we were in less-perfect markets i.e. people had less access to this information and a clear insight into the market risks and failures…. There were less barriers to entry through regulation. Technology was not owned by a few mega sized companies.

In other words, when investors behaved irrationally.

And also, when investors, for one reason or another, were less able to turn attentions to other markets? Or were so wealthy, that they could afford not to invest for a while.