It's another case of the government attempting to help the economy, but only hurting it.
My point being that it's the wrong takeaway to get mad at shorts for calling something bullshit and getting reward for it, and it sound rather irrational to me.
The dog / cat shit pile was junk mortgage bundled into a CDO and getting a AAA rating, in which pension funds buys it thinking it's safe. In the absence of the shorts, those mortgage would have gone into default, the CDOs would have become worthless, or downgraded, forcing pension funds to sell.
It's still the people holding the bag. The shorts weren't the ones initiating the bad behaviour, they made money on someone else's bad behaviour.
And of course, the government bailed the FIs out just the same.
That frankly is the wrong takeaway, or at least completely missing the original sin IMO.
The original sin is banks that wrote mortgages to people who shouldn't have them, with terms that basically fucks them over. In the absence of the short side, someone might not have profited, some FI may not have keeled over, but the people, who were sold those mortgages, were still fucked just the same.
The short side, calling bullshit on the long side, would not have existed, or at least be very foolish to do so, if the long side weren't doing something so stupid at such a scale that actually threatened the day to day lives of people.