Doing the bailout prevented the financial sector from being restructured through bankruptcy and market share reallocation. Systemically, it seems extremely implausible that preventing the normal function of the market, which incites good behavior and allocates capital to the best stewards of it, could ever be the right call.
The too big to fail financial market is already in a pathological state, it's too small, not enough competition, etc.
Yes, just brushing things under the carpet is bad, but whatever restructuring would have happened in that chaos would not have been an improvement.
It's unfortunately very much politics. For example see how the FASB tried to eliminate HTM accounting, but had to back down (and that chair resigned).
Yet! If the market already doesn't give enough shit to check the stuff in parentheses in a report for a 200B bank, then I suspect it's more of a theater than we like to admit.
Maybe the restructuring would have been chaotic, and undoubtedly would have been painful, but it's the only way to teach market actors to behave.
If Congress had gotten out of the way, other capitalized parties, like Walmart, were ready to step into the financial sector to add some much needed competition in the wake of the financial crisis:
