Eventually, the danger turns into one of systemic collapse. Systemic risk, of course, is the rationale for the bailout. A collapse of Long-Term Capital, and a fire sale of its assets, would mean losses to both its investors and lenders, whose own balance sheets would be endangered. There are already large losses rippling through the financial system from Russia and emerging markets. If no one knows, no one trades, and markets freeze as they nearly did in the wake of the 1987 market crash.
Systemic risk is surely real, if often exaggerated, and surely scary.
No one, you learned at your mother's knee, should put money into that kind of risk unless you can afford to lose it. And in particular, through the enormous increase in moral hazard they have produced. The Treasury and IMF prescribed devaluation, with the predictable calamitous results. The latest straw was the Russian default. The upside of the default, as we said at the time, was that the lenders finally lost some money, drawing a line on moral hazard in lending.