too big to fail

Its not about preventing "too big to fail", it is about preventing "too connected to fail". Breaking up Too big financial institutions make sense for political reasons since these lead to legislation favoring banks and which are detrimental to general public welfare. But that is a phony arguments since that is true for all private enterprises and that brings into question of determining what is meant by "too big".

The concern over future bailouts come from "too connected to fail". That is the reason why credit market freezed after Lehman collapsed and there were billion dollars bailout even though Lehman by its size is quite small compared to overall size of financial institutions. The same thing can be seen in earlier crisis of 1930s where it was the failure of many small banks but inter-connected bringing the whole of US economy to ground.

Hence in future, one can't be sure that when banks start failing , one may not have option of not bailing it out if it is too inter-connected and hence endangering the system. Inter-connectedness can't be determined apriori since that will depend on the general situation of economy and the environment of fear, cynicism present in such situations.