I keep hearing that the government needs to bail out certain companies (AIG, Bank of America, etc.) because they are "too big to fail." How does one guage the threshold of when a company reaches the point where the government should step in and keep it afloat because we as a society simply cannot afford to let said company fail? Do we not want it to fail because it means a huge loss of jobs, or because it is so intertwined with other companies, as well as whole markets, that its failure would infect, if not destroy, a large number of of businesses in the near term? Or some combination of both?
The way I see it, it is not the responsibility of government to save (e.g. bail out) companies that are "too big to fail." That's not a legitimate function of government, no matter how loud the whining, crying, and complaining may be of those who would be negatively affected by the big company's failure. But it is a legitimate function of government to make sure no company gets to be so massive that it is "too big to fail."
In my opinion, a company that reaches the critical mass of being "too big to (be allowed to) fail" is an impermissible monopoly and should have been broken apart by the government pursuant to our antitrust laws.
I do like the implicit concession that corporations are more important than the lives of individual people (and they are). Nobody is saying the government should step in because a person is "too young to die from X" where X is a treatable disease. We'll spend $700 billion of taxpayer dollars to keep certain financial services businesses afloat, but we wouldn't spend a measley one million of taxpayer dollars to give a 18 year old a heart transplant (assuming the status quo, i.e. no national healthcare system is in place).
We shouldn't be doing either. Corporations that fail should declare bankruptcy, whether voluntarily or involuntarily, and while I believe we should legalize drugs and tax them in order to pay for an all-inclusive national healthcare system, until we do so, we should not be using taxpayer dollars to pay for one-off medical treatments for people who need them (and we don't). But we are bailing out dying companies that could not succeed in the market for whatever reason (incompetence, corruption) because those companies grew to be so large that letting them fail will cause a lot of dumb investors who are not properly diversified to lose their nest eggs.
Which companies are to big to fail? WalMart? IBM? Microsoft? Apple? If so, the government should step in and split them up into smaller companies - they are illegal, impermissible monopolies that are anticompetive but even more importantly, their existence is a financial danger because it amounts to having all our eggs in one basket - a basket "too big to fail."
I don't believe any company is too big to be allowed to fail, but I am unemotional about it and I stay out of the stock market. So I don't care if the downfall of company X causes the DOW to drop 30% and 400,000 lost jobs overnight. Tough shit. Of course, big monopolistic companies that large don't fail because of tough competition. They fail due to the corruption and/or gross negligence of management (usually both - on that level you don't get one without the other). So not only are we deeming certain companies too important to let them fall apart, but we're looking away to ignore the fact that the only reason these companies are falling apart is due to the high levels of corruption and incompetence of those running them.
And we're telling them that it's okay - you can steal from the company, you can fuck the consumer, you can be irresponsible - because your company is so big that we can't handle it failing so we'll use taxpayer money to protect it. So steal from it, pocket what you want, run it into the ground... when things get really bad the government will come in and bail out the company.
Why are so many people so stupid?