Solutions to "Too Big to Fail" Essay

2020 Words 9 Pages
The term “too big to fail” refers to the corporations which will be bailed out by the federal government if they are at risk of going under. These corporations are too big and too interconnected with the world economy that in the case of bankruptcy, their collapse would cause widespread economic and societal turmoil. Though many agree these companies are important to ensuring economic stability, some argue that if a company is “too big to fail”, they shouldn’t exist at all. Alan Greenspan, former Federal Reserve Chairman, was quoted saying “if they’re too big to fail, they’re too big” . Systemic risk relates back to the issue of corporations being “too big to fail”. Systemic risk is the risk of an entire financial system (or entire …show more content…
Like Cohan, I think that the government should take a laissez faire approach to regulating economics. There are many ethical issues raised by “too big to fail”. First, companies who are “too big to fail” lack the incentives to act ethically. Their corporate governance standards may waiver and they have little fear of filing bankruptcy. These companies are well aware of their presence in the national economy. Additionally, the idea of “too big to fail” is a type of crony capitalism. The government takes a capitalistic approach when they allow the corporation to become as big as it is, yet the government interferes when the corporation poses a threat to economic balance. In crony capitalism, the corporation and the government form a bond which benefits both parties. Crony capitalism is unethical because these bonds give advantages to specific companies while others are treated differently. In most cases, crony capitalism occurs between businesses such as those “too big to fail” and governments who bail them out. The many criticisms and ethical issues of “too big to fail” suggest regulation is essential. There are several steps that can be taken to reduce the impact large companies have on the economy. For regulation to be successful, at least some portion of the regulation must be backed up and enforced by the law. In recent years, “too big to fail” has generated many laws, one of which is the Dodd-Frank Wall

Related Documents