Crashes never work out well, bailout or no bailout. The difference is that bailouts send banks the message that they can be risky with fewer consequences. Without bailouts, there is reason to be more cautious.
The funny thing about all this is that the Federal Reserve was created in 1913 as a reaction to the crashes and "panics" that happened in the late 1800s and in 1907. Yet, the crash in 1929 still happened. There is a long legacy of government creating ever more controlling entities in banking and ever more controlling laws that still don't prevent massive crashes from occurring and usually now result in bailouts.
Laws and the Federal Reserve have resulted in longer periods of stability, but they have also resulted in massive crashes. Depending on how you look at it, the crash in 2008 is comparable to the one in 1929. Obviously, the short term repercussions were not as severe, but it does beg the question of what the long term holds.
There is a very clear indication now that Wall Street only has to worry so much about risky decisions. Ultimately, if the market crashes again, the ones making these decisions won't suffer, but the families invested in the affected financial assets certainly will.
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