This is not a justification for government bailout of banks, it's Tyler Cowen's description of capitulation to state marketism. He claims that since bankruptcy courts are not competent dealing with large financial companies, and he gives no evidence to support this claim, that the bailouts were the best solution -- so if libertarians care about what's best for the market, then they would be hypocritical if they oppose the bailouts -- both are based government involvement, he claims, so why not pick the least harmful.
Cowen fails to differientiate between a court system, which most minarchist libertarians support, and unconstitutional intervention by the state into the free market, picking winners and losers. Even anarcho-capitalism would entail a third party entity which helps settle disputes regarding contract agreements.
Cowen shows his ignorance of libertarian principles when he uses "what's best for the market" as the guiding principle a libertarian should support. Liberty and non-coercion are principles a libertarian supports, not necessarily "what's best for the market". Most pragmatic statists can't fathom these principles.
According to Cowen's logic, if someone disseminates factual information that hurts the market, then the state would be justified censoring the information and violating free speech, and libertarians should embrace such a violation.