Too Big To Fail

If we're to learn something from this economic crisis, it is that size matters. If companies can become "too big to fail", then we can't let them get "too big". When they get too big, government should act to break up the company into units that can continue to grow and prosper. The current crisis shows that "Too big to fail" is a national security concern.

How big is too big? Best left for the Secretary of the Treasury to answer.

How do you define too big? There are many criteria one can use:

• Capitalization: What was the smallest company that NEEDED to be bailed out this time around? Limit should be set there for starters.
• Number of employees: can the country suffer the loss of that many jobs if the company goes under?
• Retirement stakes: how will retirement funds - through mutual funds, as well as employee retirement programs, - fare, if the company fails?
• Industry position: what would be the effect of the company's failure on various industries, and the trickle-down effect into the economy?
• And probably many other criteria I'm not thinking about right now.

Clearly there needs to be regulation and monitoring. Both are dirty words in an open market economy, but necessary for the safeguarding of peoples' jobs, investments and welfare. But there's no need to make this into a religious debate for or against regulation, we can have it both ways.

I propose that regulation should be optional.

1. If a company opts to be regulated, then it will be, and in case of failure the government will rescue it. All stakeholders will be safe.
2. If a company opts to not be regulated, then in case of failure the company will be left to fold and its stakeholders lose.
   

Let the people vote with their patronage. Would they choose regulated companies or prefer the riskier, but possibly, or allegedly, more rewarding unregulated companies?

Asbed