Too Big To Fail Is Too Big

It is so refreshing to see new ideas about re-regulation of the financial markets coming out into the open.

Since President Ronald Raygun’s time in office, almost all of the important laws protecting the American economy which were implemented after the Great Depression of the 1930’s have either been eliminated or circumvented by the fundamentalist, deregulation-activists so that the wealthy bankers and industrialists can get even richer at the expense of the rest of the population.

We have now reached the point where the top 1% of well off people earn as much as the bottom 95% of the American population. This is unsustainable and will result in the destruction of our democracy.

I am very pleased to see open discussion taking place about breaking up the big banks and other giant companies which are now “too big to fail.” The breakup of Standard Oil in 1911 took place because it was too big to regulate. This is a good precedent to study. The breakup of Standard Oil may have been good for competition and capitalism. Breaking up this colossal company was absolutely good for democracy.

Back then, roughly 100 years ago, Nicolas Trist who was secretary to President Andrew Jackson said, “Independently of its misdeeds, the mere power, the bare existence of such a power, is a thing irreconcilable with the nature and spirit of our institutions.” Organizations which are too big to fail are also too big for the government regulators to keep in line, and too big to allow in a healthy democracy.

Simon Johnson, the former chief economist for the International Monetary Fund, has described this situation very accurately: http://economix.blogs.nytimes.com/2009/10/22/in-banking-bigger-is-not-better/

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