Bailouts are worse. Whatever you subsidize you get more of, so if you subsidize financial mismanagement you get more of the same. It is called a preverse incentive a term I am sure your economics 101 class didn’t mention for a reason. The same reason why preachers don’t mention the stuff about Jesus saying to pay taxes.

It is better to let the banks fall, FDIC the accounts, and make sure the bankruptcy courts make recommendations to the AG office for criminal prosecution.

Besides which there was really no danger of AIG or Goldman folding. They lied about their financial situation. By the time it crashes they had moved all of their toxic assets into pension funds.