One thing to note is that the 1% have their money in many places, not just in U.S. banks. So for the most part they still wouldn't have had to live like the rest of us. It would, however, have been a great way to more evenly distribute assets. Instead we participated in perhaps the largest transfer of wealth upwards in U.S. history, all to prop up a failed system that didn't play by the rules and that benefits only a tiny elite, and that continues to resist reform to the extent that another crash is not only possible but likely.
Unfortunately these decisions were being made by the usual suspects, people like W., Paulson, Summers, Bernanke, Geithner, Rubin, and the newcomer Obama. Pretty much the only voice being listened to was that of the banks, who had stocked the government and of course the Fed with their own people.
While letting them fail, instead of the money we pumped into the insolvent banks, we could have reduced the principle of underwater mortgages to keep those millions of people from going broke and to keep them in their homes, like Iceland did. The chain reaction caused by the foreclosures has bee devastating and is still going on (my own home is way underwater, I'm long-term out of work but not receiving unemployment, wife left, will soon lose this house, etc.)
Iceland isn't the United States, so we can't directly say that things would have turned out here like it did there, but it is great to have Iceland as an example of a country that pursued that path successfully.
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