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TechnoratiNo Company Should Be Too Big to Fail
According to Treasury Secretary Hank Paulson, the biggest Wall Street banks now getting money from the government are just "too big to fail." Fed Chairman Ben Bernanke uses a different euphemism: he calls them "systemically critical." The point is that if any of them goes down, it could take the whole financial system with it. So we taxpayers have to keep them up.
We're hearing the same argument elsewhere in Washington for saving General Motors. It's just "too big to fail." So members of Congress are considering a bailout that would keep GM afloat and sweeten a merger between GM and Chrysler.
Pardon me for asking, but if a company is too big to fail, maybe just maybe it's too big, period.
We used to have public policies to prevent companies from getting too big. Does anyone remember antitrust laws? They were used on behemoths like the Standard Oil Trust at the start of the last century, and subsequently AT&T. They broke up giant concentrations of economic and political power.
But somewhere along the line antitrust laws started to narrow. Policymakers decided that antitrust would only be used where there was evidence a company had so much market power it could keep prices higher than otherwise.
We seem to have forgotten that the original purpose of antitrust was also to prevent companies from becoming too powerful -- not just in the narrow sense of keeping consumer prices too high, but too powerful in a larger sense. Too powerful in that so many other companies depended on them, so many jobs turned on them, and so many consumers or investors or depositors needed them that the economy as a whole would be endangered if they failed. Too powerful in that they could wield inordinate political influence of a sort that might gain them extra favors from Washington.
Maybe the biggest irony today is that Washington policymakers who are funneling taxpayer dollars to these too-big-to-fail companies are simultaneously pushing them to consolidate into even bigger companies. They've prodded Bank of America to take over Merrill-Lynch and Countrywide. They've pushed JP Morgan to acquire Washington Mutual and Bear Stearns. And now they're quietly urging General Motors to absorb
Chrysler.
Policymakers assume that these moves will make the consolidated companies less susceptible to economic stresses. They don't seem to see the consolidated companies will become even more powerful.
We're ending up with even bigger giants, with even more power over the economy and politics. They're already subsidized by taxpayers, and they'll continue to get taxpayer help whenever they get into trouble. In short, they're guaranteed never to fail because they're just ... too big!
18 Comments so far
Show AllExcuse me, I'm just trying to recover from someone saying Donald Trump is a hard worker who *earned* his money.*
*Support your local organic family farmers.*
Amen, amen! Been saying it for years. No corporation sould be allowed to get so big that its failure risks the entire economy. Step One should be to revoke the artificial personhood of corporations. Step Two, break 'em up into manageable pieces that are each "small enough to fail" without taking down the whole economy.
"No more blood for oil"
Most important is that no _ C O U N T R Y _ is too big to
___ F _ A _ I _ L ___
A M E R I C A N S _wise up, about the pitifully overall and inconsequential arrangements of ephemeral capital, power, and self-aggrandizement of corpoRAPE of America.
Consider that the down side of loosing pathetically corrupt structures "too big to fail", is the termination of America as a COUNTRY.
¿ Which will we choose ( to allow to fail ) ?
Namaste
Permanent buyouts, not bailouts.
Here's a similar statement, no candidate should be too big to fail.
The monopolies of the US economy are mirrored by the duopoly of US elections.
I like Reich. I would add a metaphor here: that "too big to fail" is like advocating for keeping the dinosaurs alive about 65 million years ago. I believe that the extraordinary centralization of wealth, opportunity, power, economic sectors, displacement of mom&pops and the entrepreneurial spirit, yada yada is what -- on the contrary -- begs for a mercy killing. The ones that are "too big" are the very ones that really ought to fail -- to make room for mammalian evolution, diversity of new niches, etc. The problem isn't the predicate "to fail". The problem is the "too big" part. If they are no longer forced to remain competitive, and if their existence somewhat precludes small startups from filling their niche, I guess we're gridlocked -- the sun of the American Empire is setting.
Remember that Thomas Jefferson felt that the United States Government should be allowed to remove the charter of any Corporation that did not work in the best interests of the nation.
That the Boston Tea Party was as much a protest against the Corporation as it was
against the Crown.
That the the entire reason the concept of the Corporation was formulated was so that its Investors and Shareholders could PROFIT off said Corporation without having any Personal liability for any wrongs or crimes that Corporation committed.
PK
That third paragraph deserve's some consideration. Perhaps we should remove that little protection?
quickstepper
"Everyone needs to wake up and realize that the greatest threat not only to our personal freedoms but also to the survival of life on this planet is unchecked corporate power."
Let me add to that very intelligent statement the need to slap the regulations that have been removed over the last 20 years back on tomorrow and add a few more.
Unregulated markets are not free markets.
two trillion and counting... this is just the start
Hey Donald Trump is a human-not a pig.
If you want to insult-use the word that hurts the most.
Human supremacists-so silly.
"shakes head, laughs."
If the Democrats were anti-corporate, Obama could be making a very strong case against John McClone's current campaign strategy comparing himself to Teddy Roosevelt.
Teddy Roosevelt was kicked out of the Republican Party because he broke up more corporate monopolies and trusts than any president ever did. When Roosevelt later ran for president as the Bull Moose Party candidate, a corporate goon shot him (fortunately he did not die from his wounds).
hmm...
teddy roosevelt was a war-monger who began the american quest for empire. he was rich, racist and ruthless.
The only company too big to fail could be We the People Inc.
Does GE bail out Ford? Does Wal Mart bail out K Mart? Hell no. It might buy it out, but not bail it out.
Why would We the People Inc. bail out any other company? If they were crooked, We the People wouldn't do business with them in the first place.
Reich is who should be heading Obama's economic team. Not only does he cut right through the noise and state the obvious, but he really is an exceptional debater. He is always wiping the smirk off those free marketeers smug faces.
The problem is that on Main Street, there are too many pee brains who think that they're too big to fail that they'll be flying rich pigs like Donald FUCKING Trump. They'll keep dreaming and belittling folks who are in the same working class as them except they're working just as hard and know the harsh reality. Until we get out of this silly macho egotistical delusion that we're flying rich pigs, Main Street will keep drowning because too many will ruin the fight for economic justice by making spectacles of themselves and others in Main Street. In the meantime, Wall $treet will keep laughing their ways to the bank until their ribs fall apart !
what are you talking about? "delusion that we're flying rich pigs" what does that mean exactly? it sounds as though you've stopped taking your meds.
and btw, donald trump is a hard working, successful, savvy business man who does not deserve to be attacked in this manner. he's earned his money.
I heard Dan Schorr on the radio this morning making the same observation that I and others on this board have made: corporate control of the media has resulted in the suppression of journalistic freedom and integrity in the name of corporate profits.
Many people read the delineation of rights in the US Constitution and Bill of Rights and naturally assume that the primary agent seeking to abridge those rights is the government. Everyone needs to wake up and realize that the greatest threat not only to our personal freedoms but also to the survival of life on this planet is unchecked corporate power.
Good article, Professor.
q