From Cenk's blog post:

 The government's own inspector general of the TARP program says that we gave away $62 billion we probably shouldn't have - and will probably never get back. Anyone with any degree of sanity now realizes giving away this money to AIG counter-parties at hundred cents on the dollar was either crazy or complicitous. This was taxpayer money funneled to the largest banks in the world to cover their ill-conceived bets that would have never netted them their whole money back on the open market.

 Yes, this was money given to the big banks to cover their ill conceived bets.  However, that was exactly the point of TARP and it was a wise decision.  Ultimately what brought us to the brink of collapse was a failure of confidence between the different banks.  The banks were in a position that, on a daily basis, they needed to borrow money from each other to keep operations running.

When confidence failed along with the collapse of Lehman, banks stopped lending to each other.  This, if unaddressed, would have lead to all of the big banks failing simultaneously.  Given the fallout from just Lehman failing, having all of them fail simultaneously would have been utterly catastrophic.

Now, you can rightly wonder why AIG handed Goldman Sachs money to cover what was likely a naked swap.  The problem is that if we hadn't it creates another confidence problem.  It sets up a situation where nobody would know who's bets would be covered and who's would not.  If AIG stopped cover all naked swaps, then you'd have a meltdown situation again because nobody would know who had what swaps that were now worthless.

All of the initial moves by Geitner and the Fed were all about creating confidence in the markets and in the banks.  Some of the banks were doing fine, like Goldman and JP Morgan, but had confidence been allowed to erode further, they'd have gone down with the rest of them.

 To continue further:

To add insult to injury, Goldman Sachs says they didn't need that money from us, that they were covered no matter what because of other bets that they had out in the market. 

 There are two elements to keep in mind here.  One is that Goldman Sachs has a vested interest in creating a sense of confidence in their investments.  Whether they needed that money or not, their line is going to be the same because they don't want the market to think they'd have been doomed.  This is basic bank PR 101.

Second, the bailout did in fact give money to banks who didn't need it in an effort to obfuscate which banks did and did not need it.  This is why banks like JP Morgan and Goldman were paying off their TARP loans within a year's time.  They only took those loans because the government forced them to in an effort to obfuscate which banks were weak (Bank of America, and Citigroup amongst others).

 Beyond the Bailout

The bailout was actually executed pretty effectively and though it seems like we got screwed, overall it's how it had to play out.  Telling the markets what banks were weak would have lead to those banks collapsing and bringing down other more stable banks.  

The problem is that while Geitner has worked very hard to address the problems of confidence in the markets, his efforts at unwinding the fundamental problems that got us here have been largely non-existent.  We still have the same problematic banks that we had a year ago, and they are emboldened by the fact that they know we're backing them. 

Even worse, these banks now have competitive advantages against smaller better run banks because of their implicit government banking.  If you are a business looking for a bank to do business with, wouldn't you rather work with a bank that is implicitly backstopped by the federal government.  

So going forward, these banks are only going to exacerbate the problems we had going into the 2008 meltdown.  If we don't see real efforts to address that problem in the next year, we can expect to find ourselves back in the ditch very soon.  This time though we aren't going to have the ability to borrow our way out of it.