Where do we stand now ?

I believe we should return to the basic tenets of capitalism - If businesses can't make a go of it, they should fail and the stockholders should be wiped out, Period - Are institutions like Bank of America and Citibank private or are they public? Are...

they serving stockholders or the taxpayers?

We have never had laissez-faire capitalism. We have always had patents, trademarks, copyrights, and laws that prevented monopolies or regulated de facto monopoliies. We currently have laws against discrimination. There has never been a free market and no realist would want it. Every industry and corporation in existence tries to influence laws and policy for their benefit rather than reduce regulation as an ideology. It is only when policy would not benefit them when the specter of interfering with the free market is raised.

The argument is for more regulation or less. One point I've seen made is that the when a bank becomes too big to fail that it has become a monopoly. The government should have never let Bank of America get as large as it has. Were it not for the ripple effect that Jimahl mentions I agree that banks should be allowed to fail then any of their valuable assets auctioned off to competitors. Unfortunately the megabanks do have us over a barrel. I hope that one of the things that comes out of this will be to break them up so we won't find ourselves in this predicament in the future and there can be real competition between banks again.

I currently bank with Bank of America and I'm becoming so disgusted with them that I'm considering transferring all my money to a credit union.

Amblessed, it is the conservative version of the basic tenets of capitalism that caused these businesses to be coming to government with hats in hand in the first place. It is not an easy question to answer. I would have no problem seeing some of these businesses and stockholders wiped out, if only it wouldn't have such a huge ripple affect across the entire economy. I think any bailouts or loans have to come with many strings and overisght, and that the money is used to save jobs and small businesses. We need to get the credit markets going again. That is what dirves small business, and small business is the backbone of this country. Lack of regulations for big business is the culprit. Fixing it is extremely difficult and painful. But the last people we should be looking to for advice is a conservative capitalist. They are the ones who got us here.

I'm not convinced any bank really is too big to fail. Suppose Bank of America went into chapter 11 today. They would sell their portfolio off at some big discount, and the FDIC would be left holding the bag to make sure depositors got their money. Those assets would go to those who have been more prudent, as would the deposits. Since the prudent would now have more money, they would make more loans (prudent loans, not stupid ones).

The end effect would not be economic disaster, but rather a shifting of assets to more prudent hands, which is exactly what needs to happen. When banks go under these days, it's investors and the government that lose, not depositors.

The government ends up paying either way, but by letting them fail (or possibly proactively forcing them to sell), the necessary restructuring that is needed for future growth will take place.

Bailouts keep the same fools who caused the mess in power, and ensure an endless future of more bailouts.

Toadaly, I agree just throwing money at it alone is not the answer. Doing that without changing the culture is useless and a waste. They should be targeting the money to where it will be used to help the economy, not the bottom line of the corporate elite. But as you say, we will pay in the end no matter what. I think it will be much less painful to pay now, than by waiting until they fail on there own. The job loss would be huge and the credit market, which is already crushing small businesses, will get even worse.