Too Big to Fail? Come Again?

Everyone from corporate CEO’s to blind cave-fish has heard about the AIG bailout and the claim that the banks are “too big to fail.” But what does that mean and how the hell do they justify that?

I was raised under the assumption that if you start a company and it doesn’t make money, you close your company. How are banks different? If a bank makes the mistakes that get it into financial trouble, it should be free to fail. How else do you maintain a working free market? It’s common sense! If a company is crumbling, don’t mold billions of dollars into a crutch to save it! Let it crash, promote smaller banks, use the money you saved to do something worthwhile, like funding for alternate energy sources or education!

According to the Congressional Oversight Panel, of the 7,981 small banks with assets less than $100 million, only 690 received funds from the Capital Purchase Program. You know why so few received funds? My guess is because they didn’t need them. Smaller banks made better decisions, had better customers, and used their money more intelligently than the big monster banks. Smaller banks took a hit in the recession (can we go ahead and call this a depression yet?) and some of them closed, but smaller banks will, in the long run, be a far more stable option than the giants.

Supposedly the Frank-Dodd Act ends “too big to fail” and ends bailouts. I sincerely hope so, but the reality is as long as we elect people who get in bed with the big banks we will have the same situations wearing different masks. Where along the line was it forgotten that the people who run the country are less than 1% of everyone living in it? The United States is a nation built for the betterment of its citizens, yet it seems the citizens are content to be sheep. 300 million people can just say “no, we disagree,” and watch the change. How is it the entire population can gripe and moan about the choices being made in the offices of government officials when we’re basically letting them do it?

I know this is all said and done, no crying over spilled milk, but this was the equivalent of chucking an entire dairy truck off a cliff and the milk was made of diamonds and vaccines for little kids. It’s a tragedy.

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