Per Hyman Minsky in "Stabilizing an Unstable Economy",
"There is no possibility that we can ever set things right once and for all; instability, put to rest by one set of reforms will, after time, emerge in a new guise."And that applies to letting the free market wipe out banks rather than bailing them out as well. The utility of allowing such a collapse is minimal. After time, a way will be found to once again believe in risky investments and instability will reform, no matter how many banks were allowed to fail. Meanwhile, the harm of such a collapse is significant, as a bank's customers (including businesses with otherwise profitable models) experience financing shortfalls through no fault of their own when that bank goes belly up. And those innocent customers are often themselves wrongfully driven into failure by the failure of the bank. And that means lots of layoffs of otherwise productive workers, massive suffering on account of letting banks collapse.
We arguably should have required that in each bank to be bailed out all the major executives must be fired and thoroughly investigated ... as a condition of the bailout. That was the job that should have been done but wasn't.