Out of Control Policy Blog

New At Reason: Too Big to Fail Is Becoming Official Policy

I have a new column published today on the establishment of too big to fail as official economic policy:

President Obama recently outlined his plan to fix the regulation of Wall Street and said it was time to “put an end to the idea that some firms are too big to fail.”

Amen.

But the president doesn’t need a new law or a new oversight committee, like the one he proposes, to end the concept of too big to fail.  He could, and should, simply make a speech declaring that from this day forward, any company, no matter how big or small, will be allowed to fail. If Bank of America or AIG or Chrysler goes bankrupt, so be it. Obama should unequivocally proclaim, “There will be no more bailouts. Period.”

If given, that speech would surely be the most popular thing Obama’s done since becoming president. Arianna Huffington and other liberals angry that 'crony' capitalists are getting corporate welfare would love it. Glenn Beck, Michelle Malkin, and fiscal conservatives who truly opposed President Bush’s $700 billion Troubled Asset Relief Program bailout would love it. Libertarians and independents would be ecstatic to see the end of a system that protects – and even rewards – businesses that make bad decisions.

Unfortunately, while Obama hints at ending “too big to fail” policies, his financial reforms actually continue to encourage the reckless financial behavior that helped get us into this mess.

Read the rest here breaking down how the regulation reforms proposed will lead to the tranformation of Wall Street into a collective of government-sponored banks.

Anthony Randazzo is Director of Economic Research


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