I fully agree with your counterpoint, except that I don't think it's a counterpoint, because to my mind, such a focus on short-term stability (ie, bailouts) are

I fully agree with your counterpoint, except that I don't think it's a counterpoint, because to my mind, such a focus on short-term stability (ie, bailouts) are a major driver of long-term instability! The reasoning for that seems inexorable to me. Once you lop off the deeply negative tail of any risk curve, market actors will gorge themselves on investments that have a positive average payoff but large systemic tail risks, to exactly the degree that they're confident they won't have to bear those costs. (See the Canadian housing market where banks are happy to offer cheap mortgages with just 5% downpayments, a downpayment that represents mere months of price appreciation, knowing that they're government-insured in the event of a widespread market downturn). This will continue until it stops being profitable, which is when the overall level of risk and leverage has increased to the point that even the government can't guarantee those risks anymore. So a small crash gets delayed but magnified into a big one. Long-term stability sacrificed to short term stability. That's the cost of "moral hazard", which is a bad name because it sounds like a random risk that, if we're lucky, we might avoid. But it's actually another costly conserved quantity that accumulates and accumulates.