During the first of the half of the current economic crisis, some companies began to collapse due to the subprime mortgage crisis or from the cascading economic damage that it entailed. A danger was seen in allowing some large important companies to fail. Many within the US Federal Reserve, as well as, the Bush and Obama administrations believed that these large companies were so essential to the economy that if they were not saved from economic ruin the economic damage would be even more extensive and cascading.
Therefore these Administrations prevented the collapse of some large companies by providing capital in one form or another while they attempted to return to profitability.
Many have questioned the wisdom of whether or not these companies should have been allowed to fail instead. These critics contend that it was the political clout of these companies, rather than their place in the economy, that caused politicians to save these companies. While others contend there is a moral hazard in not allowing companies that do poorly to fail. In their view, this would mean that in the future companies have less incentive to avoid risk, because they can depend on a government rescue.
Is there any economic data to support whether or not saving these large 'too big to fail' prevented far more extensive economic damage?
Or was the bail-out of these companies a waste of both money and effort?
Does economic data support support either position?