That is true in many aspects of the crisis, sadly. However, in this case, there is no public loss to speak of from the transaction itself. Rather, it served to further inflate the bubble that ultimately triggered the crisis.
You know what's REALLY too big to fail? Capitalism. And rewarding market failure is the surest way to take it down.
The media has made them into a scapegoat out of them in particular, and for some reason, everyone is following along.
And it should have been allowed to fail in my opinion. There would have been a lot of pain and other failures, but those are the risks of playing these games.
If you protect people from all of the ultimate costs of doing things that are rewarding in the short term most of the time, but incredibly risky overall, they will keep doing them!
And we will all pay a huge price for these parasites eventually if we don't wake up and stop subsidizing them.
I'm for criminal charges for those that committed fraud, investigations, more regulation, and so forth, but this "We should have let them crash and burn, damn the consequences" idea was not likely the best course of action, though it seems to be a pretty common attitude for some reason.
When you pick a vendor, a bank or insurance company, there's a chance that entity will fail. You're the one who has to judge that. It's not the government's job to protect you from failing to do that, especially when others took the time to assess the vendor and decided to use a more stable, smarter company.
And its certainly not the job of government to take the consequences from those that misjudged their bank or insurance company and assign those consequences to others that had nothing to do with the decision.
I am not "damning the consequences". The consequences are unavoidable. Its just a question of who should pay for them. Do we leave the consequences with those making the decisions that led to them? Or do we dump them off on everybody else?
This is not a zero-sum game within the US. Some courses of action have much larger consequences overall than others, and the one you are advocating seems likely to have had a relatively high overall cost to the system of the economy compared to the one the govt. chose, at least in the short term.
The government has been trying to keep the ship sailing as smoothly as possible, as is their general responsibility, despite the unsavory nature of bailing out some of those responsible. I believe that was viewed as a necessary evil.