well, let's be realistic, there is going to be some considerable contraction of the economy ('real' or otherwise). What's more, financial services are going to contract, too. The bailout just delays the inevitable, and at some cost. Better to expose the banks to the full cost of their errors to force them to reform, than to indulge their weaknesses. The effect on the real economy of delaying that reform would be worse than not. Does the US (or Britain, or the world) need so large a financial services sector? I don't think so.
As to distorting your views, I think maybe you are being a bit touchy. You surely did use the rhetorical ploy of painting small town america as dependent on the cities, but now here we see the US bankrolling NYC to the tune of one trillion. There are limits to deficit spending, and its capacity to overcome real barriers to growth.