Bankruptcy not Bailout
The market approach to a failed firm is to let it go bankrupt. When firms do not have enough revenue and cannot borrow to pay their bills, they should dissolve. Banks are one sort of business that can go bankrupt. Banks make money borrowing from lenders at a low interest rate and lending to borrowers at a higher rate. When a bank makes too many bad loans, it goes bankrupt. Insurance companies help avoid risk by collecting premiums from customers and paying those who have bad luck. If the incoming premiums are less than the insurance company has to pay out, it should go bankrupt. Bankruptcy laws guarantee debtors and then stockholders are paid as much as possible. A bankrupt firm can reorganize. More efficient firms buy what is left and reorganize. When the largest US energy company Enron went bankrupt there not a ripple in energy markets.
Fannie Mae is a failed government bank providing inefficient backing to mortgage banks, encouraging bad loans, and elevating housing demand. Freddie Mac is a government mortgage bank that sells mortgages without the usual restraint of making a profit. Rising prices made home buyers confident they could buy any house and sell it to the next greater fool. The mortgage mess was a result of government meddling. Taxpayers subsidize Fannie and Freddie. The mortgage business would be healthier with no government involvement.
The bailout is a tax on those who paid their mortgages. The goal of the bailout is to keep a few large Wall Street banks, insurance companies, and a car company or two in business. Had these firms gone bankrupt, the economy would have recovered quickly.