The problem is severity
Financial reformers talk endlessly about the too-big-to-fail problem, but they often fail to address the heart of the issue, argues David Rowe
Since that terrible week in September 2008 when Lehman Brothers failed, American International Group was taken into conservatorship and Bank of America was ‘encouraged’ to acquire Merrill Lynch, too big (to be allowed) to fail has been the central issue on the minds of regulators and politicians. Unfortunately, discussion of this issue has produced more heat than light.
The heart of the problem is that, given current institutional arrangements, failure of the largest financial institutions will
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