It's not the situation that will cause a loss in confidence, but the reaction to it. Much like Martha Stewart going to prison for lying about insider trading as opposed to the penalty for actually doing it. The FED should have allowed Bear Stearns to fail in a spectacular fashion. Sure people might have bitched and screamed and rolled on the floor a la Jim Bakker, but they would not be able to say the game is rigged. The FED will bail out CORPORATIONS no matter what risks CORPORATIONS take and the taxpayers can't do a thing about it because there is so little accountability for the federal reserve. A socialist minded democrat majority in congress eager to abuse the "little man's" attempt get ahead at every turn and eager to consolidate more power for the government will undoubtedly call for more regulation and more scrutiny of the free market when they should point their officious laser at the institution Woodrow Wilson facilitated, the Federal Reserve.
And what the hell is Bush doing? He's leading a charge via Paulson to consolidate all the regulatory agencies under one mysterious Fed that has yet to disclose who it's owners are and has yet to post a profit/loss statement. There seem to be no free market men of resolve in the republican camp. Bush's economic legacy will be the squandering of great opportunities to really set the engine of democracy free.