The former Chancellor of the Exchequer, Alistair Darling, said there had been little alternative to the taxpayer-funded rescue plan for RBS and Lloyds/HBOS. "If the plan hadn't worked, I don't know where we would have been. Where would we have gone? The International Monetary Fund isn't big enough."
That's only because government ministers in the UK and politicians in the U.S. started with one assumption, to quote Clinton Treasury Secretary and Obama Director of the National Economic Council, Lawrence Summers, "there must be a clear and unambiguous commitment that whatever else happens, the failure of major financial institutions in any country will not be permitted."
Throw women, children, and dogs overboard, but save the banks!
The government should have seen the problems coming. Lehmen CEO and one of the 25 people to blame for the financial crisis, Dick Fuld, told an audience of Davos jackals in January 2007 that "this was the year that markets could crack."
In late 2008, the chairman of RBS told Darling that his bank was in danger of running out of money. Darling said, "Okay, we have plans in place, how long have you got?" The RBS chairman replied, "A few hours."
This occurred because UK and U.S. bank regulators had embraced the Ayn Rand philosophy of the multi-term Chairman of the Federal Reserve, Alan Greenspan, that bankers would always do the right thing.
The TBTF banks should have been nationalized, with a regent, e.g. Brooksley Born, put in charge. All corporate officers should have been fired and bonuses clawed-back. They should have been given the Glass-Steagall treatment, i.e. separate the casinos from the banks, and given the Standard Oil treatment, i.e. separated the banks into entities that could only do business in one state.
Because it's going to happen again.