Too big to fail

Uncommon card · No. 114974

"Too big to fail" (TBTF) is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected with an economy that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure. The colloquial term "too big to fail" was popularized by U.S. congressman Stewart McKinney in a 1984 Congressional hearing, discussing the Federal Deposit Insurance Corporation's intervention with Continental Illinois. The term had previously been used occasionally in the press, and similar thinking had motivated earlier bank bailouts. The term emerged as prominent in public discourse following the 2008 financial crisis. Critics see the policy as counterproductive and argue that large banks or other institutions should be left to fail if their risk management is ineffective. Some critics, such as economist Alan Greenspan, believe that such large organizations...

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