Too-Big-To-Fail

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Too-Big-To-Fail

Describing a concept or policy that certain companies are so systematically important to an economy that the government must intervene if they are in danger of bankruptcy or other failure. The idea behind a too-big-to-fail policy is that these companies do business with too many other companies, and their failure will cause a cascade effect adversely impacting the economy on a grand scale. Supporters of too-big-to-fail policies argue that they maintain economic stability, while critics allege that they encourage unnecessary risk taking.
References in periodicals archive ?
The Federal Reserve Bank of Minneapolis launched an initiative to develop a plan to end Too Big to Fail (TBTF) and is now seeking public input to help identify solutions.
After the Great Recession too big to fail has become a concern for financial firms more broadly, since there is substantial interconnectedness among financial institutions involved in financial market trading activities that generate liquidity in the markets for a variety of financial instruments.
The perception that some banks will be rescued because they are too big to fail is important because it can have far-reaching implications.
financial service companies), with Fisher & Rosenblum, supra note 59; Boyd & Heitz, supra note 33, at 1 (indicating that "the potential benefits to economies of scale are unlikely to ever exceed the potential costs due to increased risk of financial crisis"); and James Pethokoukis, Too Big to Fail Is Too Good to Resist, NAT'L REV.
Miller said that, "If investors still perceived large bank holding companies as too big to fail, we would expect to see low credit default swap spreads with little variation between the largest companies.
Nevertheless, another important factor at work, which neither author discusses, is that both firms were large enough that they could reasonably be considered to be too big to fail.
In any case, too big to fail must end, even if more intrusive measures prove necessary in the end.
To be sure, the problem has become a global one because too big to fail is happening in enough countries to show that it is not indigenous to the United States, Greenspan said.
The question is for how much longer could we rely on our partners' support and solidarity, considering that we are not too big to fail and there is no risk of contagion from a possible collapse of our financial system?
What really frosts me is that my life experience has shown that rarely is anything too big to fail.
That might, wrote Hunt, "create an unacceptable too big to fail scenario.
If you can grow fast enough to reach that Too Big to Fail state of blessedness before you actually run out of money, you've got it made.