A big part of the recession danger was that if several of the too large wall street banks failed, there would be chaos and cascading failures, because you wouldn't be able to get your money from them for a while, it would take months or maybe years to figure out what really was owned or loaned. If I was say retired, my 401k might be 25% bonds and 25% cash and x% stock but if the company that held the records failed (say fidelity) and the stock market crashed, and the value of the bonds was unclear since so many companies went out, you can't easily get your money to live on - that was the danger of the 'cascading series of failures' scenario.
All of that was a good reason to bail out the banks, but not a reason to bail them out and then not break them up into the smaller banks that they had been, not so many years before. The banking industry had just gone through a long series of mergers. That the banks were "too big to fail" was a reason for the bailout, but also a reason to break them up again; only one of these was actually done.
Whatever the gov does to them afterwards, bailing private companies and not taking possession of them on the spot is a huge failure of the duties of a government with their citizens.
Break them apart later, sell them, or keep them for a few years until the economy can absorb them. But I still can not accept how a democratic government can push money at will into private hands and nothing happens out of it.
agreed, we definitely should have forced them to split, but there are limited powers in a democracy (a good thing :-)). Imagine if this happened today.
