Simple question

Why are banks “too big to fail”?

Back in the olden days there was a saying that went like this:

Don’t put all your eggs in one basket. 

The general idea being that a distribution of eggs throughout several container would mitigate the loss of one container and damage to said eggs whereas a single container results in the loss of all eggs if the container somehow fails.  In banking the analogy is that the banks are the baskets and the eggs are our money.

Fairly obvious really.  Why is it then that banks and other large corporations are allowed to grow to such a size that failure of any one of them can result in disaster for the whole economy?  Shouldn’t there be some kind of monopolies commission, government body or something in place to stop companies from growing too large and threatening the stability of society?  Just a thought.

This is also an excuse to post this picture:


Filed under Modern Etiquette, You decide

3 responses to “Simple question

  1. Banks aren’t too big to fail. That’s a falsehood put around by the banks and their friends. Look at how many Merryl Lynch and Goldman Sachs former employees are in positions of political power. We should let a few go to the wall, just to rein the remainder in!

  2. Quips

    Unfortunately, as a country which prides itself as being one of the financial cornerstones of the world, a heavy reliance is placed on our institutions, which are actively encouraged to be successful. The problem lies in the “at what cost?” line of questionning. It’s not a question of being monopolistic, but it is about accountability. The SEC in America are in the process of re-configuring their entire system for the umpteenth time (good old Madoff managing to out-shine SarbOx in a relatively short space of time) and I have a strong suspicion the FSA in the UK will do the same at some point. It might all be a question of too-little, too-late but it is far preferable to taking no action at all.

    So, to answer your question, it is important that the country continues to thrive provided that it does so under the stewardship of accountability.

  3. Everone knows that ‘The Bigger you are, the harder you fall’

    Except in Western society the idea now seems to be – if you can get big ENOUGH you won’t be able to fall – the rest of the earth will fall to you! 🙂

    Not been achieved yet but it doesn’t stop some from trying.


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