Like many people I've found this whole Wall Street mess confusing. It's hard to fathom how the people who do understand the ins and outs of finance, those who work in Banking, let things get so out of hand.
My sister, who was a finance major years ago and who does have a better grasp of the fundamentals, admitted to being just as puzzled as to how all this blew up so badly. She sent me this piece from yesterdays New York times, the Freakanomics column, that clearly explains how we got to this point and why the different actions were taken. It's not a long article, and is very good reading
if you're interested in understanding this a bit more.