Quote Originally Posted by Elldallan View Post
If a major bank goes bankrupt and is allowed to fail that means that a significant amount of the people with savings there will loose their money and because laws typically mandate that debts are paid out in order of the size of the debt, starting with the biggest means that it's the "little people" that gets screwed over, every single time. At least this is true for states that doesn't have some system where the state guarantees safety for $X.
Besides, if a large bank is allowed to fail it will typically cause a lot of troubles for the other banks because they all have their "securities" invested with each others and if they can't get at those that might mean they risk failing as well.
That will teach people not to assume that just because a bank has been around the corner for 100 years that the bank is safe. It is precisely because of all these moral hazards (the bailouts, and government-guaranteed deposits) that people do not care what the banks do with their money. The banks do not care. They just gamble and compete based on getting higher yields instead of safety of their customers' deposits. The depositors don't care, because the govt's got their back (a careless assumption). People today do more research about the cell phones they want to buy than the bank that they want to put their deposits in.

You are supposed to let bankrupt companies fail. And then the prudent banks who survive will come in and buy up the assets and depositors. And the entire system starts off from a more solid base. Why do you steal money from the rest of the population just to save the banks who're foolish? Do you know that prior to the 2008 crisis, there were more than 7000 banks in the US? The prudent banks are supposed to be gaining market shares in times like this!