Linking investment banking to household savings makes large institutions politically and economically difficult to let fail. A government cannot ignore the mortgages, deposits, and current accounts tied to a major bank without disrupting the wider economy. Reimbursing each customer separately sounds cleaner, but the paperwork and time required would leave people unable to pay bills or redirect income while the replacement system was assembled. Customers without easy internet access would face an additional barrier. Savings banks remain exposed to risk, but regulation normally keeps their activities less speculative than merchant banking. In a fast-moving crisis, preserving the operating institution can therefore be the only response quick enough to maintain the payments system.
Notable Point · 1:47:17-1:49:10
Why governments bail out banks
Governments rescue banking institutions because deposit, mortgage, bill-payment, and account infrastructure cannot be replaced fast enough by reimbursing customers individually.