I worked for one of the large banks that got out of this crisis pretty much unscattered. The Friday before TARP was introduced, which ended the succession of large banks collapses in the aftermath of Lehman, we were told internally that we didn’t think we could last more than a couple of weeks in the current market. And if we only had a couple of weeks left, most of the other (weaker) institutions had much less.
Like for the cuban crisis, I think it is easy to forget how close we got to the brink. We have already witnessed a complete collapse of the banking system in 1929, in a world that was much less inter-dependent than it was in 2008. It is survivable but it is ugly.
Nobody wants a banking collapse. The question is whether the people who caused the collapse and profited greatly should get bailouts and keep their money.
In my view the government should have supported the system but not single banks. Let them go down and make sure that executives end up with zero money. Their lifetime contribution to the economy was negative so their bank accounts should reflect that.
I agree with you but there was a lot of talk about other approaches like nationalization but they got shot down quickly so the only path left was what the bankers wanted. I still find it hard to believe that the people that ran their banks into the ground walked away with hundreds of millions of dollars.
I still remember how all the people who made decisions or got hired in Washington during that time had an investment banking background, ideally Goldman Sachs. It was infuriating.
This is why regulation is necessary.