Anti-trust policy and "too big to fail"

Mankiw worries about an active anti-trust policy here.

This seems like a truly bizarre thing for us to be worried about these days. Hasn't the crisis taught us that "too big to fail" isn't desirable? And that to be "too big to fail" doesn't even necessarily mean that you're big enough to manipulate markets in an anti-competitive way?

The libertarian in me thinks that the problem behind the crisis is that the government didn't break up these huge financial firms five years ago, before they got "too big to fail." If we had 75 medium-sized banks instead of 10 huge ones, would the government really need to step in and bail out the failures in order to prevent economic collapse? Over the long run, a more active anti-trust policy might mean smaller government.

Maybe I don't understand, though. I've never claimed to be an economist. I often wonder, though, if they've had "government is bad" beaten into them so often that they can't separate themselves from it, even when it doesn't on its face, appear to make much sense.