It seems that virtually no one is standing by their free market principles these days and that the rather anti-market notion of “too big to fail” is now received wisdom.

Ah-hem. What?

The government's "bailout" here is on solid moral ground since this problem can be traced back to Fannie Mae and Freddie Mac. Since government caused the problem they have responsibility.

The mortgage giants were treated as governmental entities, backed by the government, and staffed by government appointees. Funny how all those responsible are walking away without any consequences.

“Not the time to worry about moral hazard“!

As if those very, very large financial entities, whose actions have world-wide ramifications, don't subtend those actions with moral hazard. I'm not saying the guys running those institutions have "moral hazard meetings" monthly, but it strains credulity to suppose that in the back of their minds they don't believe Uncle Sugar will come to the rescue if things go south. I don't think I'm being cynical here.

I don’t have the financial expertise to assess that idea but, frankly, it sounds better than massive corporate welfare.

The problem I see is that creditors will be paid off "to the extent possible", meaning they will be losing value on their holdings, which may well put them in financial difficulty. This really does seem to be a zero-sum game, where somebody has to lose.