Tuesday, September 23, 2008

That which is too big to fail is too big to exist

That timely aphorism comes courtesy of Senator Bernie Sanders, who is is making sense, as he nearly always does:

We must end the danger posed by companies that are "too big too fail," that is, companies whose failure would cause systemic harm to the U.S. economy. If a company is too big to fail, it is too big to exist. We need to determine which companies fall in this category and then break them up. Right now, for example, the Bank of America, the nation's largest depository institution, has absorbed Countrywide, the nation's largest mortgage lender, and Merrill Lynch, the nation's largest brokerage house. We should not be trying to solve the current financial crisis by creating even larger, more powerful institutions. Their failure could cause even more harm to the entire economy.
Exactly.

2 comments:

larryniven said...

Wouldn't a company that's too big to fail be...a monopoly? Stop me if I'm not making sense (or don't, cause this is the internet), but wouldn't the only way for a company to be fail-proof be for it to have no or negligible competition and a means of making sure that things stayed that way? By definition, that would be a monopoly, as I recall. So, immediately, a few questions arise.

1. Who came up with this too-big-to-fail idea, and when?
2. Why didn't we hear about it sooner?
3. How can we ensure that this person and this person's associates stay far, far away from the controls of our economy?

Dale said...

Larry, excellent questions. In reply, I can only express the hope that someday, you or I will become "too big to fail" in the relevant sense and will be handed large sums of free money if things start looking grim for us.

As for the controls placed on monopolies, those are examples of ... regulation. We mustn't have regulation. It's bad. How bad? Very, very bad.