Too Big To Fail

I have been watching the Paulson Bernanke testimony before the United States Senate this morning. On several occasions I have heard that companies that have been bailed out have been "too big to fail." Paulson, in particular, has also said that the regulatory environment has been insufficient to the task, having been designed in a different time and for different circumstances.

The obvious issue on the table for the American taxpayers is that we can never again allow any company become too big to fail. When that occurs, the taxpayer becomes the inevitable guarantor of survival. In some respects we have to refine the scope of anti-trust laws. It is one thing for a company to have a monopoly in a business category. That was one of the intents of anti-trust legislation. It seems logical to look at another category of regulatory oversight.

If a company begins to get so large or powerful so as to impact the economy adversely if it fails then the regulatory apparatus could place a governor on that company's growth. It seems to make sense to never again allow any company to become too big to fail.

That, however, runs counter to the American capitalist ethic and the drive to "go big or go home."