I understand that to let a bank fail is to be avoided as it loses the savings and pensions of many people. Would it have been practical for the government - rather than propping up a bank with taxpayer money - to let it effectively become bankrupt then nationalise it at rock bottom price?
The people who would lose out would be the shareholders and, possibly, the board. While I'm not saying to target shareholders per se it seems more appropriate for them to lose out (they invested in a business which failed) rather than the taxpayer.
The idea would be to re-privatise the bank (possibly merged with other banks which suffered the same fate) once it could be made a going concern again, making significant money for the treasury (and hence the taxpayer).
Or would failure and nationalisation of the bank wound it too deeply in some way for it to then compete in the market?
I freely admit I don't understand the economics. Hence this post. Maybe someone here will know.
James