In retrospect, I wonder what would have happened if we let AIG and the banks fail. The FDIC would convert them into DINBs with the insurance limit raised to $250k per account holder. All debts including mortgages would be discharged tax-free automatically (making the topic of mortgage notes moot). Bank charter restrictions would be loosened so that new banks can be created as soon as possible.
Whatever the implications of letting the debt just "fall on floor" would have been, it's worth noting that the decision to not allow that outcome was reached years before the events themselves. Ben Bernanke's helicopter money speech was at least one demonstration of this.
