Comment: Treasury Secretary Timothy Geithner is quoted as saying when asked about the fate of large banks post the Lehman bankruptcy that, “‘None of them would have survived’ had the government stood aside and let the crisis run its course, he said. ‘The entire U.S. financial system and all the major firms in the country, and even small banks across the country, were at that moment at the middle of a classic run, a classic bank run.'” He further rejects Goldman Sachs position that it did not need government funds.
To put the Great Recession in perspective the chart above totals the total deposits in failed banks as a percentage of nominal GDP going back to 1930. If one takes the position that BofA, Citi and Wachovia would have failed without TARP loans then the action by the Fed was necessary in stemming a systemic collapse. It is important to note that the 2008 figure does not include either JP Morgan or Wells Fargo, both of which have deposits, received large sums of TARP funds and where seen as dangerously close to failure in the fall of 2008.