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Debate: "Too big to fail"

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-''Click on the pencil icon and research and write arguments here''+* The Financial Stability Board has identified 29 big financial istitutions that are Systemically important financial institutions. The Basel Committee has adopted a series of indicators that reflect the size, interconnectedness, the lack of readily available substitutes of financial institution infrastructure, their global (cross-jurisdictional) activity and their complexity. In some cases, expert judgment can supersedes the indicators. [http://en.wikipedia.org/wiki/Systemically_important_financial_institution Systemically important financial institution on Wikipedia]
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''Click on the pencil icon and research and write arguments here'' ''Click on the pencil icon and research and write arguments here''

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Should banks be allowed to be "too big to fail?"

Background and context

This debate stems from the 2009 financial and economic crisis in which many banks and financial institutions, under the threat of collapse, were deemed "too big to fail", and thus bailed out by the US and other governments. The question now is whether governments should take measures to limit the size of banks and other financial institutions so that their potential collapse does not pose a systemic risk to the financial system.

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Should the government limit the size of financial institutions?

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Pro

  • The state should never support failing businesses. When banks are so big that they could destroy our country if they went down, they hold us ransom.
  • Giving tax payer money to banks when they are having problems rewards bad behavior. Rewarding bad behavior, encourages more of it.





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Con

  • The size isn't the exact problem, the problem is when the companies potential damage to the country as a whole. They are related, but only partially. Precisely wording the problem is 1/2 the way to the solution and just the size of the company isn't the problem. The problem is risky behavior that puts the country in jeopardy.





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Should the government control oversized, powerful financial institutions?

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Should the government limit the economy's reliance on financial institutions?

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Are some financial institutions systemically important to the economy in the sense that the failure of one of them could trigger a global financial crisis?

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Pro

  • The Financial Stability Board has identified 29 big financial istitutions that are Systemically important financial institutions. The Basel Committee has adopted a series of indicators that reflect the size, interconnectedness, the lack of readily available substitutes of financial institution infrastructure, their global (cross-jurisdictional) activity and their complexity. In some cases, expert judgment can supersedes the indicators. Systemically important financial institution on Wikipedia


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Con

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See also

External links and resources:

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