Too big to fail?

by Al Portner

Too big to fail has been the rationale for endless bail-out votes in Congress and discussions among various political talking heads. We are warned a governmental failure to help big business will bring the entire economy down.

Bush Treasury Secretary Henry Paulson approached Congress last fall with a three page request for $700 million to stabilize the nation’s financial markets. Congress argued for a couple of weeks, added 330 pages to the enabling legislation, and agreed to provide the money in two big slugs of $350 million each. Treasury doled out the first slug, but now has no idea how it was used. Worse, the bankers who received the money feel no responsibility to account for their actions.

No one, with the possible exception of the recipient banks, has been satisfied with the result. Endless conversations continue about how to make the system more transparent and more accountable. Unfortunately, the basic issue has yet to be publically discussed.

The issue is size.

If we believe in the capitalist ideal, then some companies will be winners, others will be losers, and some will disappear. It is intolerable that some companies have become so large that they cannot be allowed to fail.

Companies should not be allowed a market share over “x” percent of the total in whatever business it engages. If memory serves, President Theodore Roosevelt addressed similar difficulties using the 1890 Sherman Anti-Trust Act for authority.

The Theodore Roosevelt administration filed 44 lawsuits to dismantle the trusts of his time that included railroads, oil cartels, and some banks. T.R. was not opposed to big business, but he did believe that regulation must serve as a check to keep business from overwhelming government.

Today, our situation is similar. History teaches that companies or governments tend to become so complex over time that they collapse under their own weight while becoming tyrannical and/or non-competitive. Recent advances in computing power have allowed for ever-larger companies to be managed in what seems to be an effective manner. The downside is that fallacies in original reasoning are more difficult to identify because speed pressures have encouraged these very thinking errors.

The society should count to ten and break up a number of these huge, dominating concerns so that they can once again be allowed to fail if that is what they deserve.

Your thoughts on this and any other previous postings are always welcome.

Al Portner is a former daily newspaper editor and publisher who operated newspapers in seven states from Maryland on the east to Hawaii on the west. He is currently the proprietor of The Assignment Desk, LLC, an editorial services consortium with over 200 affiliate writers, photographers, and designers.

Portner is also the author of hundreds of articles and the forthcoming non-fiction book “Mark Twain and the Tale of Grant’s Memoir.” He can be reached at alanportner@theassignmentdesk.net. The Assignment Desk URL address is www.theassignmentdesk.net.