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Since large bank failure is a systemic issue, the costs to the economy and therefore to government are sufficiently high that a bailout becomes a rational economic decision. Moreover, governments often view bailouts as a moral imperative. The President and Vice-President of the Minneapolis Fed argued that the too-big-to-fail problem was still persistent in the mid part of the 2000s, a view not shared by some in light of the improved governance of the FDICIA (Ibid)

The improved governance came in the early 1990s as a consequence of the savings & loan crisis, which had its roots in a real estate bubble similar to the one in the mid-2000s that precipitated the current financial crisis and bank bailouts. Deregulation was a major contributor to that crisis (Glasberg & Skidmore, 1998). The government would ultimately intervene in the financial system in order to preserve its integrity. This experience would form the core of bailout philosophy for the current situation and can be studied to provide clues as the impacts that the current bailout will have......

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