Government bailouts have several outcomes, none of them good. #1. Knowing that mom and dad will bail you out leads to excessive risk taking by companies. #2. Bailouts just continue to inflate the balloon. #3. Bailouts delay businesses from reorganizing, trimming and improving things.
If a Company is too big to fail, the system has 2 mechanisms to deal with the problem; neither of which involves a bailout. 1. Anti-trust legislation: prevent a business from becoming too big to fail by dividing it up regionally or into subsidiaries. 2. Chapter 11 Bankruptcy: allows a business to reorganize and trim off unprofitable parts of the business, refinance loans, and rehabilitate until it becomes profitable again.