Arguments against the conservation of cake

Or, why you can't have it and eat it. Information Arbitrage is wonderfully splenetic about bailouts:

The U.S. taxpayers saved Citigroup's life, and for that we may get up to 8% of the company. THAT is called a "punitive program" in Hank's parlance - punitive for the U.S. taxpayer. In my world when you save a company you own ALL the equity, not 1/12th of the equity. The fact that the taxpayer gets up to 80% of AIG - now that starts to make sense.

Quite right. To do anything else involves moral hazard. By all means bail out a systemically important player if you judge it necessary. But be sure to crush the equity holder.