If the WM situation is "resolved" by a govt bailout, it will again raise the question of what is too big to fail. I understand the argument about BSC (counterparty risk would have hurt other IBs) and FNM / FRE, but I think the argument for a WM bailout is weaker, given that it isn't as involved in trading as BSC, and doesn't have a GSE designation.
Honestly I dont care too much about what should be done, I rather focus on what will be done. a fdic takeover will induce lines and runs in the entire country, that would be a nightmare for bernanke and blair. think they will just rather get it merged and strip out the bad stuff. but what would be the catalyst for that?panic is not doing it, maybe collapsing deposits will do it and soaring texas ratio will do it