Too big to fail?

Fri Jan 19 20:21:25 UTC 2001

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.

This is the whole reason behind the federal reserve. To provide a
kinda of safety net in case banks ran short on ready cash.

> Is PG&E too big to fail?

I think this is something that has to be considered. The state will
certainly not allow the customers of either PG&E or southern cal
edison to be without power for a long period of time. Too much public
safety depends on it. So if the companies fold, the state will have no
choice but to take control of the company.