The Economic Fallacy Of ‘Too Big Too Fail’

The onset of the financial implosion two years ago brought with it an ongoing dialogue about the ‘Too Big To Fail’ (TBTF) doctrine of government intervention into the financial sector. According to TBTF, some financial institutions, such as major insurers like AIG or large money-center banks like Citi and BofA, are deemed to be too large and too centrally interconnected in the US and world financial systems and economies to be allowed to be recognized as insolvent and taken through bankruptcy resolution.