Note for Public Policy going forward:
If a business enterprise (public, private or GSE) is or becomes Too Big To Fail, then it needs to be broken apart into smaller components.
If this can’t be done under current anti-trust legislation, then new legislation is needed to support this – perhaps in a mostly pre-canned way.
Filed under: Business, Economics, Public Policy |
PurpleSlog - The Future Will Be Kludged 
The whole reason we have bankruptcy mechanism is to tear up unstable/unprofitable businesses. I’m sorry, no company is “too big to fail.” Why would our government prop up failing business?(Please don’t tell me good lobbying) This will only prolong the recession. Since we are under the Keynesian school of economics, expect Boom/Bust cycle to continue.
To quote Austrian Economist Robert Murphy – “If the Austrians are right in their diagnosis of the boom-bust cycle, then the typical policy prescriptions offered by most economists are harmful. These “countercyclical” measures try to prevent the recession from unfolding, by stamping down on unemployment and propping up insolvent businesses. Yet these actions simply prolong the agony, and ensure that even more resources are squandered while the economy tries to adjust to a sustainable configuration. To adopt a biological metaphor: Of course nobody likes vomiting. But if someone has ingested poison, throwing it up is a good thing. Efforts by physicians to numb the person’s gag reflex and settle his stomach will lead to disaster.” [1]
Unfortunately, reality does not reflect this. Right Citigroup?
[1] http://mises.org/story/3220