7 Pages Posted: 10 Dec 2010 Last revised: 3 May 2014
Date Written: December 9, 2010
This Essay explores the constitutional implications of a threatened default by a large state. Much like the huge financial institutions that became distressed in 2008, a large state might well be deemed too big to fail. If that kind of state seeks a federal bailout, it would hold most of the cards in any negotiation because Congress lacks the power to compel a state to pay its debts. After outlining this hold-up issue, the Essay concludes by assessing some possible responses by Congress, such as invoking the Guarantee Clause or imposing future fiscal penalties under the Spending Clause.
Keywords: state default
Suggested Citation: Suggested Citation
Magliocca, Gerard N., ‘Too Big To Fail’ States (December 9, 2010). Connecticut Law Review, 43, 1089-1095. Available at SSRN: https://ssrn.com/abstract=1722926