What is TBTF? The great Wikipedia says:- "The Too Big to Fail policy is the idea that in American banking regulation the largest and most powerful banks are "too big to (let) fail." This means that it might encourage recklessness since the government would pick up the pieces in the event it was about to go out of business.moral hazard in business operations. The phrase has also been more broadly applied to refer to a government's policy to bail out any corporation. It raises the issue of moral hazard in business operations."
I feel that the government should stay out of our live, and let people live them on their own. We don't need to be told hot coffee will burn us, were to get out healthcare, and we should not have to be told to no buy things we could never afford. I just don't understand why something needs to be bailed out. If a large bank fails then another will take it place. . . It happens all the time in countless other industries. It just donsen't seem to register with me, maybe someone can explain it to me. I feel that this sad little arguments to save banks and institutions, which are only financial by the way, are TBTF and need to be bailed out are just made becasue people in power have their own money in mind. In addition, I feel that if these guys in government had to use just their own money and not decided that they will use everyone's, the taxpayers, moneythen they wouldn't be handing it out so frivilously. Basically what I am trying to say is that I don't think anything is too big to fail. Just like life cycles in nature when a company does not succeed then it is destroyed and then someone else assums the role of leader and life goes on. If a bank goes under another will sprout up or take its place and we will contine to live and conduct ourselves.
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TBTF does seem a little dangerous. It does seem like it gives corporations and easy out when they commit less than stellar business practices. But the fact is it is and was too late for the type of economic model that you would rather see. The government realized a tad too late that this crisis was coming and when it did realize what was coming they knew that something had to be done. The type of capitalistic model that you describe, where new companies take over for those ones that die out was exactly what the government promoted. What happens when other banks do not want to take over for the old one? What happens when that firm has toxic assets on their balance sheet and no one wants to go near them? Do we allow this company that employs thousands and holds the life savings of millions to just vanish? Do you suggest that we allow pure capitalism to take over and spiral us into a depression? No, I do not suggest that. So you see in a free enterprise economy and in a pure capitalistic society, other companies can chose not to play! What did the US do with Bear Stearns…they helped JPMorgan Chase buy them, similar to what you describe. What did Wells Fargo get helps to buy? What happened to all the banks that were bought? They had government help. What happened to the one company that was not deemed TBTF? Lehman Brothers failing caused this financial meltdown. Lehman was TBTF and we let them fail. We allowed them to go under and guess what. The stock market saw its greatest single day loss in its history. TBTF is a unfortunate reality, and inconvenient truth (lol).
ReplyDeleteOn another note, there is a reason that TBTF exists and Theodore Roosevelt best summed it up. “In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” I believe that action whether right or wrong is always better than nothing is and I want my government to act the same way. You may not agree with the tactics but you must agree that they cannot sit by and idly watch as a few bankers in monkey suits tear their nation apart. Politicians know this as well and they realize that 50% of people will agree with their actions and 50% will hate. If they do nothing 100% will despise them for the rest of their terms.
I hope this helps, as it comes from a mind that agrees with your conservative nature on economics but differs in how it believes the government should behave to protect its people, but domestically and abroad.