US Treasury official: "No company is too big to fail"
Jay
March 4, 2010, 1:02 pm

And nobody believes him.

Seriously, what is with the government these days? They are completely out of touch between what they say and what they do. It's so easy for them to say "Oh, we don't believe in too big to fail" right after they just bailed out the country's biggest banks.

The government will never let the biggest companies fail. You know it, I know it, and the market knows it. Anybody who says otherwise is either kidding themselves or intellectually dishonest.

The implicit too-big-to-fail designation on certain companies will only encourage them to take more risks as the government stands ready to cover their bets should they fail spectacularly. And then there are those in Washington who advocate that we regulate those deemed too big to fail.

No matter what happens, it seems that we're in for more government. Is the company failing? Okay, government intervention. Now the government rescued the company, and it demands it be regulated. More government intervention.

When will people realize that it is the government that is distorting incentives and risk in the economy? The government should have a light touch on the economy. The invisible hand will take care of the rest.