Monday, June 22, 2009

Bigger is Better?

Posted By on Mon, Jun 22, 2009 at 11:55 AM

I haven't done this in a while, but the NYTimes has an interesting piece today, asking if a company is too big to fail, is it too big to exist?

Companies such as AIG, major banks, automakers have gotten government help because they've been deemed to intertwined with the overall economy, essentially too big to fail. And investors have relied on that fact.

"One dissenter within the administration — Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation — says the government must stamp out the notion that Washington will ride to the rescue if big banks run into trouble. Investors must understand that they will lose money even if the government has to step in, she says.

'The reality is there are investors and creditors out there that have relied on "too big to fail" to make investment decisions,' Ms. Bair said. “We have to take this security blanket away.”

That is easy to say, but not so easy to do."

Policy makers are trying to figure out how big is too big, but in a world where bigger is better, it's a fine line. To read more, go here.

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