In this case, it's just due to sunk costs. You've already given this defense contractor a trillion dollars. Ten years later, the contractor has a flawed project

In this case, it's just due to sunk costs. You've already given this defense contractor a trillion dollars. Ten years later, the contractor has a flawed project with a lot of holes in it... but what can you do? If you cut them off, then you have this shitty product that you've already spent a trillion dollars on. Getting someone else to fix it (or develop something else entirely) would cost even more. So you grit your teeth and pay them the 200 billion that they need to redesign and fix it. And then, when they still have a fucked up product a year later, you're facing the exact same problem... except now you've spent 1.2 trillion dollars. The interesting thing is that in the long-term, it's actually a good idea to tell the contractor to fuck off. The contractor then goes out of business, and the rest of them change their tune really fast. Meet your fucking deadlines, or we'll cut you off regardless of the cost. The end result would be much more realistic cost estimates, better timelines, and a much smaller chance of fuckery. Of course, tell that to the project director who is getting hounded by Congress and is looking for the most cost-effective (short-term) way out. In the brokerage and bank case, it's due to the government saying, "Well, we can go off of principle and tell them to go through bankruptcy like everyone else. But if we do that, then the economy will tank and we'll be looking at trillions of dollars in damages. So we'll pay the couple hundred billion dollars that we need to keep that from happening." Unfortunately, that leads to the exact same thing as the contractors - these banks say, "Well, then all we need to do to get free money from the government is to get into the position where it costs more money to do the right thing than pay us off for making bad decisions!"