Too Big To Bail

I remember not long ago, the Government’s warning of financial meltdown if certain banks deemed too big to fail, were not bailed out. The warning contradicted everything I thought I knew about the free market.  Did I misunderstand capitalism? Perhaps naïvely, I regard Capitalism like nature in that; every financial institution will naturally find its place on the ever-shifting financial food chain. Even a child understands that nature, while exceedingly magnificent, has a darker side. With today’s breathtaking high-definition coverage, a lion devouring a freshly killed gazelle after a grueling chase is stunning. While nature, like capitalism, is sometimes unfair it remains just and balanced.

President Obama has taken it upon himself to intervene on matters best left alone. When the proverbial lions, AIG, CitiGroup and Lehman Brothers face almost certain death, Barack Obama makes the determination that nearly $1 trillion of taxpayer dollars should be used to “save” the behemoths. Naturally, if such banking giants were to collapse, the effect on the global economy would be devastating; wouldn’t it?

(Source: dailyfinance.com) Too big to fail? This isn’t a designation that the Obama administration wants to exist any more. New regulations proposed by President Obama would result in “leaner and simpler institutions that don’t carry the weight of the system,” according to the Associated Press.

It was believed that the collapse of any of these companies could result in the collapse of the entire American financial system — which is why they were bailed out. But the bailouts did little good other than cost billions and billions of taxpayers’ money. In order to prevent this from happening again, President Obama wants a group of interconnected companies to “pay a heavy price for the systemwide risk they pose.”