The Dow Jones Wilshire 5000—the broadest measure of the U.S. stock market—lost $1.2 trillion in value yesterday.

And that's just the start of it. If you think housing has been in a rough patch recently, wait until we have 8% unemployment, rattled confidence and a ruined credit market.

I understand that most of America is aligned against this "bailout." I think they just don't understand how this could impact the real economy. They're about to find out.

What strikes me most about the failed bailout is that it was an extreme act of political cowardice.

Paul Ryan (R-Wis.) summed it up:

"We're all worried about losing our jobs," he said, in a speech supporting the bill. "Most of us say, 'I want this thing to pass, but I want you to vote for it—not me.' "

According to Forbes, two-thirds of Congress' most vulnerable members voted against the bailout plan.

What a system.

The irony of this situation is that the true cost of the bailout is far less than the $700 billion bandied about. The bailout plan was lost, I think, because that $700 billion figure stuck in people's heads. Depending on how the program was run, we might get most, all or more than all of that $700 billion back.

Don Luskin ... who is as ideologically opposed to government intervention as anyone I know ... explained this well his SmartMoney blog:

"There are impaired assets on the balance sheets of banks and brokers. There's no ready private market for those assets, except at ruinous prices. But that doesn't mean the assets are really worthless -- it just means no one wants them, because everyone already has too many of them. So it's a perfect time for government to step in and help...

If the federal government were an investor, it would be the most efficient one in the world. It has the lowest cost of funding to buy investments ... and because of its vast size, and the diversity of its income streams and asset holdings, the government is in the best position to take on risk.

That means that the government ought to be the highest bidder in the market for risky investments because those investments are worth more, and present less overall risk, to the government as compared to any other possible investor."

There's a chance that Congress comes back and fixes things after Rosh Hashanah. Until then, it could be interesting.