‘Too Big to Fail’
One of my former bosses from the late 1990s recently penned a guest commentary for our hometown daily, the St. Louis Post-Dispatch. It was published yesterday and essentially asked, if certain financial companies have become ‘too big to fail,’ why did U.S. regulators allow them to get that big in the first place, and why do they continue to protect said firms’ disproportionate size? An excerpt:
It is disturbing, to put it mildly, that almost everything that’s been done so far in the name of saving the American economy has worked to keep these already huge corporations big or to make them even larger through industry consolidation.
It’s about time we realized that bigness itself is much of the problem, not only in the financial sector, but also throughout our economy. Rather than working to preserve these mega-entities, we should be trying to create a marketplace that actually can be controlled by human beings and that meets human rather than only corporate needs.
That strikes me as an issue entirely worth debating.
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One Response to “‘Too Big to Fail’”
Mr. Morice is echoing an old complaint. These multi-national institutions have accumulated power, both financial and political, far greater than any third world country and even of some western nations. They have effectively grown too large to be regulated.
We've had ample warning. In the October 26, 1999 New York Time, Jeffery Garten (then dean of the Yale School of Management), speaking of the massive mergers, states, “But by itself, sheer size, whether in finance or in other industries, should not be a concern. The real problem could be the unchecked political influence of the global goliaths.” And, “… the see saw of private and public power is seriously unbalanced.”
The CIA released a report in December of 2000, titled “Global Trends 2015: A Dialogue about the Future with Nongovernment Experts”, in which they point to these merger and globalization trends. Quoting from the report: The elements of globalization – greater and freer flow of information, capital, goods, services, people, and the diffusion of power to nonstate actors of all kinds – will challenge the authority of virtually all governments.” The report covers a fifteen year timeline in which it suggests “States continually will be dealing with private sector organizations.”
The size and global scale of financial institutions all but places them above regulation. I'm not sure how one would regulate an institution that moves billions of dollars/Euros/yen/reals/etc from one country to country in instantaneous bursts. This is like a science fiction story. They could have the power to collapse governments.