Your argument would have made sense, had this been a case of a few rotten apples on an otherwise healthy tree. By 2007, however, the entire banking system was exposed to toxic derivatives. Had the government simply allowed it to fail, we would still be spiraling headlong through the dephs of the second great depression. This is what "too big to fail" means: The consequenses for society of letting these institutions fail would have been catastrophic. In terms of damage caused, letting the banking sector fail would be akin to letting the healthcare- or judicial system fail. These sectors fulfill vital societal functions, i.e. they are "too big to fail".