Reddit mentions of Panic on Wall Street: A History of America's Financial Disasters

http://www.damninteresting.com/the-dutch-tulip-bubble-of-1637/

http://www.investopedia.com/features/crashes/

http://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

http://www.amazon.com/Panic-Wall-Street-Financial-Disasters/dp/1893122468

This book - especially the last 4 chapters - does a good job of explaining why the policy was there in the first place (extrapolation based on the accounts presented) as well as why it was a bad idea. The book covers major financial panics in the history of the US. The "too big to fail" issue wasn't quite the issue in 1907, but definitely had a hand in that panic. Some banks were propped up with private money while others were abandoned. This was before the FDIC and SEC, btw.

The point? If banks fail because of bad decisions, they need to fail and collapse. Yes, the depositors should be saved but the bank itself demonstrated that they are too risky to be allowed to continue operations.

As with nearly all previous financial panics, if a bank fails and the economy takes a hit, we will recover and we will learn lessons from it. That's what led to the FDIC and the SEC among other institutions. They were created because of stupid people doing stupid, risky shit.