The massive market selloff after the House of Representatives shot down the Bush administration's $700 billion mother-of-all bailouts provided proponents with the ultimate "I-told-you-so" moment.

But even had the vote succeeded Monday, any rally likely would've been short-lived. The fact remains that beyond this immediate, terrible crisis, economic fundamentals are appalling.

Let's assume the administration takes another shot and gets the legislation approved -- it seems inevitable considering the alternative. U.S. taxpayers, poised to save the world economic order, will take proud ownership of a vast array of mortgages and related securities, bought for just pennies on the dollar. Banks -- those that are still standing -- will have cleaner balance sheets and the ability to recapitalize. Credit will flow freely throughout the land. Pretty soon the housing market will magically rebound and the government will reap a tidy profit, selling back to the banks the assets we all just purchased so dearly and yet so cheaply.

True, there were four bailouts in Europe over the weekend and the FDIC had to broker and backstop Citigroup (C) deal for Wachovia (WB) banking operations. But, hey, the system managed to get through a few consecutive days without a major financial institution totally failing. Where's the market's gratitude?

Partly it's that the constriction of credit on such a colossal scale is like a too-tight tourniquet. It stops the bleeding for now, but eventually you'll lose the limb. The $700 billion would've restored at least some blood flow.

It's also dawning on the market that the bailout, representing as it does only about 12% of mortgages not backed by Fannie Mae (FNM) or Freddie Mac (FRE), might not be nearly enough. Like the Roy Scheider character in "Jaws" said upon getting a good look at the shark: "We're gonna need a bigger boat."

But most sobering is that even if the government's rescue plan were a done deal, investors would have to resume looking at economic fundamentals. What they'd find is that they stink.

Almost overshadowed by the relentless drama playing out in Washington and on Wall Street has been a steady stream of bad economic data. We're not taking sides here, but Monday's Commerce Department report sure makes it sound like Main Street could use a bailout, too.

Consumer spending accounts for more than two-thirds of economic activity. It came in flat in August. That was below expectations and further bolsters the view that the economy is weakening in the second half of the year. In the past year the rate of so-called core inflation, which excludes food and energy prices, notched its largest increase since 1995.

All of which comes hard on the heels of a Friday report that was almost entirely upstaged by the bailout brouhaha. In case no one noticed, it turns out that the economy grew less in the second quarter than forecast. Gross domestic product gained just 2.8%, not 3.3% as was previously thought. The current quarter is expected to be even softer.

This bodes poorly for share prices, which are supposed to represent a claim on future earnings. That handiest of valuation measures, the price/earnings ratio, says that as profit declines, so shall stocks. So it's of no little concern that we also learned this on Friday: Corporate earnings unexpectedly fell 0.4% in the second quarter (the forecast was for 1% growth). That follows a drop of more than 7% in the first three months of the year. Ugh.

That's why we were pushing safe CDs Valuations don't mean much when fundamentals are awful -- and deteriorating.