The fact that the Paulson bailout is somewhat similar to an FDIC bailout, except that the Paulson plan preserves existing bank structures and bails out their stock and bondholders in many cases, has stock market implications.

First, there should be no large positive effect on non-financial stocks. The market already knows about these bad loans and the fact that bailouts of some sort lie ahead. The market actually rallied on the news, but has since given back most of those gains, although futures at this moment suggest a strong opening tomorrow. That rally was partly driven by short-sales being covered.

In my opinion, the bear market in stocks is still intact and ongoing.

Second, there should be a positive effect in many bank stocks. I submit that the market anticipated the Paulson plan and it's already impounded in bank stock prices. Bank stocks have rallied and been much stronger than industrials since mid-July. In fact the regional bank stock index (KRE) went from 22 to 36 just before the announcement. It is now about 38. I believe that the good news that prompted this rally has now been released, so that investing in bank stocks on that news is not a good idea.