stopping companies from being “too big to fail”

A quote that often comes up in discussions during a financial crisis is “company X is too big to fail”. Companies that big are determined to be in need of assistance from the public.

Given this, I think companies should be banned from getting that big. All companies should be able to get as big as they want as long as they can fail. After that, they should divest.

They have to divest anyway, but at the worst possible time for them and the public.

An independent agency could determine what limit of companies that hit the limit and force them to sell. Failure to do so would result in jailtime for executive management.

Sharesholders could be reimbursed via dividends, who could then invest in other companies.

No one should be too big to fail.

One response to “stopping companies from being “too big to fail”

  1. smartpeopleiknow

    Looks like I am not the only one to think this. Matthew Yglesias, who gets more visitors in a hour than I get in months, is thinking along the same lines here:

    http://yglesias.thinkprogress.org/archives/2008/11/too_big_to_be_allowed_to_exist.php

    He’s a good writer to follow anytime, but in particular when you are interested in the latest financial crisis.