Monday, September 29, 2008

To Big To Fail

When AIG was going down the drain the Fed had to step in and throw billions of dollars at them because if AIG failed it could have destroyed the economy in the process. In other words, AIG was to big to fail. The same was said of Fannie May and Freddie Mac. These bailouts have cost taxpayers hundreds of billions of dollars and more is coming.

I do not possess the in depth knowledge to fully understand these failures but the argument that they have to be saved is , in each of these cases, quite defensible. It makes sense that if the collapse of a company would cost the nation more that saving it would it is the wise choice to save it.

But at some point you need to learn the lesson and stop allowing firms get to big to fail.

I mention this in light of the latest forced marriage (No, not the Palin kid) of Citigroup and Wachovia. When you have the largest marrying the largest, do we not risk having a firm grow so large we can not let it fail?

How about just a little regulation and oversight this time around.


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