Why we have to limit their size

The main lesson of [the bailouts] is that society cannot permit the existence of private institutions that are too large to fail. And that’s not only because they might eventually fail and then we are on the hook for their liabilities. It’s also because the lesson of the bailouts — both the auto and banking bailouts — is that you desperately want to become too big to fail. You get better terms from the government. You’re protected from bankruptcy and insolvency. You have tremendous access to the halls of power. You get a seat at the bargaining table rather than before the bankruptcy judge. Reaching “too big to fail” status is like being kinged in checkers. The rules give you special powers and subsidies. Now that those advantages have been exposed, companies will have much more obvious incentives to chase size. Unless, of course, we stop them.

Ezra Klein


  1. Chris

    Sorry about the short article… feeling pretty sick today.

    By the way, Derek Fisher should definitely get suspended, but not Kobe or Artest.

  2. Ian

    Well, you desperately want to be big and have everyone else in your industry acting equally irresponsibly, so that if you fail, your whole industry goes with you.

  3. Sheepywoman

    Yes, and now my friends, my company has positioned itself to TAKE OVER THE WORLD!!! Muhahahaha. Financial irresponsibility shall be ours!