Too Big to Fail Is Too Big to Save?

When the 800 pound gorilla in the room becomes nearly terminally ill, do the 600 pound gorillas save their leader or let him die? Do they take over and implement newer, more efficient ways of ruling the group? Do they save him to prevent and resist change? Will change disrupt the flow of food? Will change disrupt the rule of law and peace in the land? Will change open up new opportunities within the community, and for the community?

When very large cap companies fail, there is an enormous buzz and fear that the industry around them will also fail. That fear may be irrational. That fear may scare us into thinking "too big to fail". That fear may be promoted by the failing company so that their executives can stay in power and retain their huge compensation packages.

When industries mature and enter a decline, it is the time when disruptive technology, disintermediation and fresh, new players with fabulous ideas could enter these markets to conduct business in new and more efficient ways.Ultimately this drives the costs within the industry downward, and also, the prices paid by consumers.

Here's a (probably ill-conceived) analogy:
Should you invest in your 7-year old car to keep it running for a couple more years with poor fuel economy and additional cash outlays for repairs and maintenance, when you can buy a new car that will give you another good 7 years, with better fuel economy, less polution, and includes maintenance? Over the 7-year time period the costs of the new car may be LESS than keeping the old car running. This doesn't even include the environmental impact and advances in safety for you and your family.

Likewise, should we invest $Trillions in our old banking and financial system to keep it running for a couple more years, when we could reengineer, retrench, rebuild a better banking and financial system with those $Trillions? A new system will last another century, but also, create jobs, boost morale and stimulate the economy!

Also, we could flush out the riff-raff in the present system and reward those who have been honest and performed well by promoting them to run the new system. We don't really need more of the status quo. We don't really need to keep the power with those who made the system so complex, so corrupt and so risky. We can force obsolescence on those who have only ruined the banking and financial system, get rid of the old-boy network, and restructure for a brighter future.

Too big to fail means too big to save. Some companies should never have become so large as to in effect BE the industry. Don't put all your eggs in one basket.