Whoa! What did I miss?

On Friday, the Dow Jones was up more than 300 points in anticipation that the House of Representatives would pass the mother of all bailout plans. And it did. Woo-hoo! Right?

Sadly, I see no champagne bottles. I see no confetti falling from the rafters. All I see is lots and lots of red, and one of the worst days the market has ever seen.

The Dow Jones fell nearly 600 this morning, plunging below the psychologically important 10,000 mark. The last time anyone got this animated over Dow 10,000 was March of 1999, when it passed the mark for the first time.

Thanks for nothing
Fast forward more than nine years, and here we are -- sub-10,000. Add in the perils of inflation, and the Dow has lost considerable value in the past nine years. What happened?

Let's start with the bailout. After the House first shot down the proposed bill last Monday, the market's attention immediately shifted toward whether the bill would go through at all. Once the bill became reality, the market's celebration got a fierce reality check: "Oh, yeah, that's right ... the reason we need a bailout is because our credit markets are shot to pieces. Resume sell-off."

And how about those credit markets? Remember, it's not useful to judge how bad our credit crisis is by watching stocks -- the real trauma lies in the debt market. On this front, things still look pretty bleak. The TED spread -- a measure of how willing banks are to lend to each other -- still remains disturbingly high at around 3.9%, almost four times where it stood a month ago. The Federal Reserve tried to ease this situation by doubling the amount it lends to banks through its term auction facility, with the total amount available to banks now standing at a whopping $600 billion -- call it the quiet bailout, if you will. In English: Despite the bailout, credit markets are still an abysmal mess, and that's scaring the pants off markets around the globe.                                                                                                    

Nice job, bailout
Just days after the president signed the bailout into law, I can already hear the sneers and jeers over its failure. "I thought the plan was supposed to prevent the economy from collapsing," the hecklers keep yelling. "Now stocks are plummeting. Way to go, bailout!"

Easy there. First, let's recognize that the plan wasn't designed to boost stocks; it was designed to keep the economy from imploding and banks such as Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) from going under. It was designed to put an end on the run-on-the-bank behavior that sealed the fate of Washington Mutual and Wachovia (NYSE:WB). From that point of view, it's so far, so good.

The day before the bailout was originally announced -- just over two weeks ago -- Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) were staring disaster in the face -- a prospect that would have unquestionably made today's sell-off look like small potatoes. As easy as it is to point to today's weakness as a reason that the bailout's already a failure, keep in mind that it'd be much, much worse without one.

We enjoyed an enormous boom over the past decade that's coming home to roost. The bailout plan saved us from a looming collapse, but by no means does that mean markets are getting off scot-free. This plan was no panacea, that's for sure.

Markets correct. Problems resolve. Hang in there, Fools.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. JPMorgan Chase and Bank of America are Motley Fool Income Investor recommendations. The Fool has a disclosure policy.