This is insightful, although the government conspiracy is a out there.
The market is totally dependent on the risk of failure. It is completely built into the system. Every interest rate out there is predicated on the risk of failure, aka non-payment. Why do people with poor credit ratings have to pay high interest rates? Because the lender is taking a big amount of risk in lending. Loans with low default risk bear low interest rates. The safest investment is government T-Bills but they are a bad investment because they bear very little interest. More risk == More reward.
The bank's owners (shareholders, aka investors, aka lenders themselves) took a risk by investing in their particular bank. They took this risk expecting to earn a reward in the form of a dividend or higher share price. It is their fault that the bank failed by allowing their board of directors to allow such bone-headed financial positions. It is the shareholders who should suffer the fallout of the banks failure by losing their investments. Completely. That's the risk they took. Anything else ruins the market dynamic. Who reaps the benefit of a bailout? The shareholders do. Do consumers? Does my mortgage interest rate decrease? It should... its not as risky for the bank to loan me the money anymore since they are being propped up by taxpayers.
The better solution IMHO, would have been to bail out troubled mortgages. You're in foreclosure and you life is about to be ruined, here's $200K from the federal government. Loan forgiven. 700 billion could have saved every home in america from foreclosure AND it would have saved the banks from failing. The downside is the guys who paid their mortgages on time, every month, wouldn't see the benefit that deadbeats see.... that is unpopular politically and couldn't fly. Instead, mortgage help was the first thing struck from the original bailout proposal. How insane is that? Ostensibly, the package was to help the state of the economy but the only people being helped are the banks. Real working class people don't get any help. Ain't that the way of the world???