Why Do We Bail Banks Out?

We bail them out with our money because many of them own the sovereign debt (debt of nations) of the US and other countries.  If we let them default on debts, it throws a lot of chaos into the economic system of the world, which is built on debt.  In short, people use their money and future money (usually paid in the form of taxes, fees or other revenue) to make sure the places that handled their money irresponsibly are still around so we can pay them back what we already owe.  

What?

If Banks Are "Too Big to Fail", Why Did We Let Some Banks Get Bigger?

I don't know.  It would seem prudent and wise that if we see certain financial institutions as "too big to fail" that we would reduce their size/scope appropriately.  One of the problems listed time and again is the blending of deposit and investment financial institutions.  A deposit/consumer bank (your local credit union or BofA, Chase, Wells, etc...) should not be allowed to conduct the same kinds of transactions as investment banks (Goldman Sachs, Merrill Lynch, etc...).  Remarkably, after the financial crisis of 2007, Bank of America acquired Merrill Lynch, Chase acquired Washington Mutual, Wells Fargo acquired Wachovia and it goes on.  Some big banks got even bigger.

People Bailout Banks

Governments may make the decisions to bail out banks, but it is entire countries that end up with the bill.  Even with the current Eurozone crisis, the language is being used that governments are "forgiving debt", but that someone still gets stuck with the bill.  That's not possible if the debt is truly forgiven.  Every debt has a collector and it is up to the collector if they will forgive the debt.  If debt is owned by banks and other private investors, it is actually up to them (the creditors) to truly forgive debt.  Otherwise, it's just shifting payment onto others who will probably want to be paid back in the future, charging a certain amount of interest of their own - and so the cycle continues.

People want their money and they want more for lending it to you.

Benjamin Franklin once said something like "loan money to a friend and you will lose them, loan money to an enemy and you will gain a friend".  I'm too lazy to go dig up the exact quote right now.  People do tend to be nicer when they owe you money...either that or they avoid you like the plague because they never intend on paying it back.

In America we can blame Wall Street, and we can blame our government, but in large measure we have to blame ourselves for our refusal to act collectively against the policies and practices that brought this about.  

It's your government, it's your country - constructively contribute and participate.