Here is an excerpt from Martin Wolf's excellent article
We must create effective mechanisms for orderly bankruptcy of very large financial institutions. Indeed, this is far and away the most important lesson of the crisis. Another is that if large institutions are too big and interconnected to fail, precisely because they are bound to get into serious trouble together, then talk of maintaining them as “commercial” operations, as the chancellor of the exchequer does, is a sick joke. Such banks are not commercial operations; they are expensive wards of the state and must be treated as such.
The UK government has to make a decision. If it believes that costly bail-out must be piled upon ever more costly bail-out, then the banking system can never be treated as a commercial activity again: it is a regulated utility – end of story. If the government does want it to be a commercial activity, then defaults are necessary, as some now argue. Take your pick. But do not believe you can have both. The UK cannot afford it.