One the best ways to deal with the current economic disaster is to hit it on two fronts:  One the largest reasons FOR the market collapse was not enough people paying their debts, which were given to consumers by banks and lending institutions that thought that everyone was going to pay whatever they wanted.  When they found out that this was a pipe dream, the bubble, as it were, burst.  So I would spend a good portion of that bailout money finding out how many people were in arrears, and then paying off a good chunk of all the debt that was incurred. 

This is how I mean that:  You look at the institutions that were the most affected by the bubble collapse.  Have the Fed take a look at their books, and see just how much they are owed, and other factors within that, such as who owes the most, who is consistently paying and who isn't, and who would be uncapable of making the payments the lenders want.   In other words, get cash flowing back in where none was, from the bottom up, instead of from the top down.  If a bank makes all these mortgage loans, and, say, ten percent aren't paying and are headed to foreclosure, pay off a portion of that ten percent, and lower their payments so they can continue to keep their homes, and then lock the interest rate down so they can't raise it again. What that does is that it means that money is going to keep coming in, which keeps the companies afloat.  Breaking even is better than losing money.

 The next step is give smaller, but still ample, cash infusions to lending institutions to keep consumer credit going.  If you can start car loans going out again, and student loans going out again, then you can get the whole thing back on track, and also give money to businesses for their payrolls.  Once mass layoffs start, then the game is up.  The goal is to keep the workforce employed and producing, and the consumer credit industry going so that the big machine doesn't grind to a halt.  However, all of this is academic if all consumer confidence is lost.  If the spending stops, the whole thing stops.