Fizmo, I'm a lib but in this case I think that practicality has to trump ideology.
The temporary ban on short selling may be a mistake. Shorts recognize problems before everyone else and help curtail inflated share prices. They brought down the share prices for financials because the prices deserved to be brought down. If it had been possible to short real estate then the real estate bubble may have been avoided and we would not be in this freaking mess. (Note: I NEVER short, too risky for me).
As for the bailout: the damage has been done. The emergency exists and US financial markets cannot be allowed to fail. If the government can buy these junk mortgages cheap enough it may even make money or break even. The devil is in the details but nobody is saying what they are yet.
If this thing turns into a $trillion bailout then the entire G8 should probably contribute because a failure of the US financial markets would devastate the world economy. How's that for a weird idea? It would probably never fly because voters in other G8 countries are still ticked about Iraq.
The takeover of Fanny and Freddy and the AIG loan/partial takeover were necessary but (hopefully) temporary steps. They were huge news a few days ago. Now they are just details.
If this thing doesn't work then we are all screwed.
From an investment perspective, I am considering taking advantage of any market pops to increase my cash allocation from 20% to 35%.
Wise move on going to cash on a larger percentage of your portfolio IMO. I sold some stuff yesterday and will continue to sell on strength--this thing is far from over. As soon as they lift the ban on short selling, whether it be next month or in November, the shorts will attack the financials and drive them back down again.