[AndrewDucker]

Do you have any idea what the current financial situation would have looked like if the government had just let the banks collapse?

Hint: a lot like a jenga tower does just after you take away a vital piece.

Letting the entire financial system collapse might _possibly_ have led to better behaving banks in the long term(although I doubt it, people don't learn). But in the short term it would have cascaded through the entire economy and left the economy entirely non-functional.

[billswift]

It could have, but I have seen no evidence to support this. In fact, that is why the econo-blogger Megan McArdle at The Atlantic supported the bank bailouts, because she feared that would happen. But despite reading her blog regularly, she has presented evidence only her (and others) fears about what could have happened.

[aswanson]

C.f. for what (possibly) happens when banking systems collapse: http://www.livinghistoryfarm.org/farminginthe30s/money_08.ht...

[yummyfajitas]

That's also what (possibly) happens when your agricultural system fails due to a dustbowl/drought, free trade is eliminated, big chunks of industry/labor cartelize, and the government takes over huge sectors of the economy.

[condor]

"Do you have any idea what the current financial situation would have looked like if the government had just let the banks collapse?"

No, and neither do you. That's why its called a free-market. It's free to do anything. It's not a free-market thats only free to take the form of what our expectations are.