One such process is what would have happened by default: let the banks who bought bad assets crash and burn. Now that we bailed them out, we have actually encouraged similar behavior in the future. The banks get all of the upside rewards, but none of the downside risk.

I'm not arguing that the bail out was necessarily the wrong thing to do. There's other considerations (like the effect on the rest of the economy) but this is one of the big drawbacks.