Despite understandable complaints that the program socializes risk while privatizing profits, the initiative aims to entice private investors to take troubled assets off banks’ hands at prices that won’t leave the banks busted. If the bad assets are left on banks’ books, the situation will deteriorate to the point where there’s little alternative to outright nationalization. And now that the government and Federal Reserve have spent, lent or guaranteed $12.8 trillion–almost the value of everything produced in the country last year–the nation simply can’t afford to continue the endless chain of bailouts.

By refusing to pump more cash into the ailing Detroit automakers and forcing out General Motors (NYSE: GM) CEO Rick Wagoner, President Obama signaled that the government’s bailout buffet is no longer all you can eat. GM must rework its recovery plan and Chrysler must close its deal with Fiat by mid-May to receive additional federal aid. That’s led many to believe that both companies will ultimately be forced into a “prepackaged” bankruptcy, in which creditors, bondholders and the automakers have already agreed to terms prior to entering bankruptcy proceedings.

That’s probably the best option available to both Detroit and the government, allowing the auto giants to restructure debt and rework their labor agreements. It would also save the government from pledging billions of dollars in ongoing support to the industry.

On the bright side, corporate debt markets appear to be improving, with shorter-term maturities performing reasonably well in the first quarter. Somewhat surprisingly, in the mutual fund world, floating rate bank loan funds were the top performers, returning better than 8 percent.

The technology sector also continues to outperform the broader indexes on a relative basis, with the dot-com bubble burst having shaken out many of the weaker players earlier this decade. Earnings at many technology firms have also proven much more resilient than analysts had expected.

Economic data show signs of slowing deterioration; the number of first-time jobless claims is slowing and real estate-related data improved slightly. Equities may have rallied, but this more likely represents a bottom rather than the emergence of a new bull market. If that’s the case, expect the broader market to trade sideways until there’s clear a resolution to the structural problems still facing the economy.

But if the government can get the banks and Detroit some semblance of order, it’s quite possible we could be looking at the backend of the recession by late summer.