Had Obama chosen not to issue a bail out...

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what would have happened?

While the bailout had many points and cover stories, most of it fit two things.

More than half went to allowing the writeoff of 100% losses against other income, that year. This was a tax holiday for the largest incomes, who also pay most of the tax, which cut government income by trillions.

The second largest was AIG, who had insured the Credit Default Swaps, which exceeded it's net worth.

It was Bankrupt, and any Judge would have declared remaining assets to be paid as a portion of debt. In Chapter 11, it could be written down, and continue the business. They did pay off the bailout.

The Baillout paid off at 100%, which was a multi billion payday for Goldman Sachs. They had shorted securities they had sold, no longer owned, and knew were no good.

This is like selling a house that you know has bad wiring and leaking gas, then buying insurance on it, after you have no connection to it.

Fannie, Freddy, and the banks would have been closed, the value of Mortgages marked down, then reopened and valued at mark to market.

Pouring in money has not changed anything, except the money is missing. Over the country real estate is down a third, which means there is a Twenty Trillion dollar hole in Mortgage values.

The Banks are bankrupt, Zombie Banks, Fannie and Freddy are a hole larger than the National Debt.

At a time when for mortgage markdowns people would have stayed in their homes, kept making payments, they were foreclosed, credit ruined, and there are no buyers.

The Bailout killed the housing market, and made it impossible to recover.

Fannie, Freddy, the Banks, are still in the same or worse shape.

In the next tier, local property taxes, the decline has lead to laying off lots of workers, which has made things worse.

The bailout was a huge gift to the rich, and has prolonged the recovery by a decade at least, or perhaps forever. Public debt has gone up by Trillions.

The only thing the bailout did was bailout the Government Pension Fund. They own AIG, Goldman, and the Stock Market. Thier investments were bailed out.

States, Cities, Towns, Counties, Local Business, and Homeowners, Workers, got screwed.

The bailout was signed by George HW Bush and passed by both Republicans and Democrats. They were convinced that the economy would have completely collapsed without it based on the premise that the credit markets have to work for a modern economy to function.

A few months later some of the money was used by Obama to bailout the auto industry. Based on the premise that if they collapsed it would have taken many auto jobs and the jobs of suppliers and of the people who provided services to auto workers. Also based on the premise that these companies could not get private financing to continue under chapter 11. The credit markets were still too frightened.