Too big to fail?

Fri Jan 19 02:29:52 UTC 2001

In message <20010118205105.A1059 at localhost.co-nectschools.net>, Scott Brim writ
es:
>On Thu, Jan 18, 2001 at 04:31:58PM -0800, Sean Donelan wrote:
>> 
>> Remember during the last deregulation cycle.  When the Savings & Loan
>> and Bank industries were "deregulated" one open question was: are
>> there banks considered too big to fail.  The problem with that doctrine
>> is it warps management's risk analysis.  Instead of appropriate investments,
>> management makes excessively risky decisions in an attempt to achieve
>> short-term returns and maximize shareholder value.
>> 
>> Is PG&E too big to fail?
>
>But what would that mean?  All the infrastructure is there, the only
>issues are cash flow and regulation of prices.  If PGE was diddling with
>its infrastructure, lending out towers to shady businesses and such,
>there might be a parallel :-).

During the 19th century, there were a number of railroad bankruptcies.  
The courts ruled that since all of their assets were good for only one 
thing -- a railroad -- the only choice was to keep the corporation 
going.

The real change, per the article I cited, is who makes the hard 
decisions.

		--Steve Bellovin, http://www.research.att.com/~smb