And without the government backstop, your savings would not exist today (and anyone else with cash in a money market or savings account). The chain of collapse

And without the government backstop, your savings would not exist today (and anyone else with cash in a money market or savings account). The chain of collapse without a backstop is not a robust argument in general, becuase at the point you say Morgan, etc. fail without a government backstop and then try to assume that those firms were the only (or majority) beneficiaries, it becomes shaky. Why? Because if the banks failed as you described, nearly most would have as well and then anybody holding cash in a bank (read all of us sans the mattress crowd) would have been in horrendous trouble. Remember, the government had to backstop not just investment banks, but money market funds as well (which were failing due to the related crisis of confidence issues). Remember the northern rock episode with huge lines of people unssucessfully trying to withdraw their money in the UK? Imagine not being able to withdraw your cash from a money market or savings account. Banks being structurally exposed to runs and therefore requiring government backstops is actually a well understood issue. The point is we all benefited from the federal backstop, and this argument that, why should banks benefit from an implied or explicit backstop ignores the fact that all of us are backstopped by this as well, whether you realize it or not. Nobody can claim that people keeping their life savings in a money market or savings account and earning 5% interest a year is not also implicitly benefiting from government backstops in general, so let's not single out the investment banks in this case. As for AIG, this has been discussed in infinite more detail so the interested reader can look up articles on this, but the essence of the point is that of the 13 billion owed, most of it was already collateralized (which means they would have just kept the US treasury collateral had AIG collapsed). Yes, there was a smaller portion that was hedged via CDS that could have failed as insurance, but let's not claim this is the entire 13 billion, in fact, it was far from that. And let's also remember had CDS truly failed it would have reflected a state of the world where most banks were in default, and forget about some investment bank not being able to collect their insurance, we are talking about ATMs not working anymore at this point. So the point is the backstop prevented things from getting to this nightmare, saving banks but also the rest of us as well.