Too Big to Fail: A Misguided Policy in Times of Financial Turmoil
affiliation not provided to SSRN
October 13, 2010
C.D. Howe Institute Commentary No. 311, October 2010
The bailouts carried out by governments for large banks and other financial entities in the recent financial turbulence are often characterized as a Too-Big-To-Fail (TBTF) policy. Proponents of such a policy argue that preventing the failure of large banks (and possibly other financial and non-financial entities) is necessary to limit the impact that such a failure might have on other institutions or on the real economy. Opponents argue that while such a policy might seem attractive in the short run, even given the enormous financial cost to government associated with its intervention, the long-run costs are even larger and are almost always ignored, making TBTF a poor policy choice.
Number of Pages in PDF File: 32
Keywords: Financial Services, Too-Big-to-Fail (TBTF)
JEL Classification: E52, E58, G28
Date posted: October 29, 2010
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