I too like the idea of periodically assessing companies for 'Too Big To Fail-ness', but I have not been able to come up with a formula that could be neutrally and fairly applied to any company in any industry.
Some hairy points to consider:
1. If a company fails in isolation (other companies in the same market are not failing), does the test need to be different from when entire markets start to fail?
2. What is the process by which companies that fail the 'Too Big' test are divided into parts that are no longer too big? Is the Board of Directors given a 90-day warning? Does the federal monopoly monitoring/compliance department dictate how the downsizing occurs?
That being said, these are solvable problems - just very hard ones. The intuitive appeal of this concept makes me nervous though....
What is the 'Too Big' litmus test?
I too like the idea of periodically assessing companies for 'Too Big To Fail-ness', but I have not been able to come up with a formula that could be neutrally and fairly applied to any company in any industry.
Some hairy points to consider:
1. If a company fails in isolation (other companies in the same market are not failing), does the test need to be different from when entire markets start to fail?
2. What is the process by which companies that fail the 'Too Big' test are divided into parts that are no longer too big? Is the Board of Directors given a 90-day warning? Does the federal monopoly monitoring/compliance department dictate how the downsizing occurs?
That being said, these are solvable problems - just very hard ones. The intuitive appeal of this concept makes me nervous though....