# What do libertarians think of "Too Big to Fail"? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [February 16, 2013, 8:16am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483 "2013-02-16T08:16:38Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [February 17, 2013, 9:53pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/21 "2013-02-17T21:53:57Z")
> [@Nunzio\_Tavulari](#): > > I sense that some here are saying that the government intentionally created a financial system that was TBTF. They did, but it wasn’t their idea. > > They had legislation in place to prevent this, put in place because of the Great Depression. Lobbyists from the big banks wore down those rules by making large contributions to politician’s pockets in return for them nullifying the existing legislation. > > My impression of the Libertarian agenda is that they want fewer regulations so that they can do the types of things that caused this collapse. They rake in the money while it’s good, hide it overseas thanks to less oversight, then file for bankruptcy when it goes down the tubes. Thousands of small investors lose their shirts and they get a year in a white-collar prison and walk away with millions. > > There are many things that I like about the Libertarian platform but some of it seems to the right of the Tea party. What I’m getting from this is that you seem to be suggesting that while existing political elite has allowed a bit of a corruption for, uhm, several decades to erode level playing field - even though their intentions were never this bad - the evil would really come if we would allowed Libertarians to run the Government? In short, it could only get worse so let’s stick with what we got because Change is not good when you have Libertarian option. They call this scare tactics. And it seems to be working cause bailouts are still going on - it’s just nobody knows cause they are never called for a vote. On the other hand… like you care? ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [February 17, 2013, 9:58pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/22 "2013-02-17T21:58:19Z")
> [@F.U.Shakespeare](#): > > I would prefer that the TBTF institutions never were created. When I voiced this opinion in the past, conservatives were invariably critical of it. It is very easy and not all that difficult to break them up. One could argue that new dynamic and increased number of players and a level playing field might incur innovation and entrepreneurial spirit. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [February 18, 2013, 1:07am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/23 "2013-02-18T01:07:03Z")
> [@newcomer](#): > > What I’m getting from this is that you seem to be suggesting that while existing political elite has allowed a bit of a corruption for, uhm, several decades to erode level playing field - even though their intentions were never this bad - the evil would really come if we would allowed Libertarians to run the Government? > > In short, it could only get worse so let’s stick with what we got because Change is not good when you have Libertarian option. > > They call this scare tactics. And it seems to be working cause bailouts are still going on - it’s just nobody knows cause they are never called for a vote. On the other hand… like you care? I’m not sure what your focus is here, _but monopolies are a natural result of unrestrained capitalism_; you can see this historically: the East India Company, Standard Oil, etc. Before becoming TBGT Fail, they become TBGT compete with. (That Microsoft is losing power despite its monopoly is often cited as a counterexample, but Microsoft, unlike banks, needs to compete in an environment of rapid innovation.) IIRC, even Adam Smith espoused government regulations to impede monopolies. Do “Libertarians”? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [February 18, 2013, 1:36am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/24 "2013-02-18T01:36:30Z")
> [@kaltkalt](#): > > Antitrust regulation used to be about monopolies and unfair, uncapitalistic business practices. Now we need it for a new reason. It’s beyond that… hell most of these companies have bought themselves exemptions to the antitrust laws. When their size, and thus their existence, threatens the entire world economy, they must be broken up. For the sake of the damn world economy! It seems so obvious. I agree. But I’m confused how the government breaking up companies that get too big has anything to do with libertarianism. ---
**Author:** ![miss\_elizabeth](https://avatars.discourse-cdn.com/v4/letter/m/838e76/32.png) [@miss\_elizabeth](https://boards.straightdope.com/u/miss_elizabeth)\ **Post date:** [February 18, 2013, 1:55am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/25 "2013-02-18T01:55:38Z")
> [@Rand\_Rover](#): > > I’m a libertarian, and I endorse the following in all particulars: > > The OP of this thread is similar to taking a boxer, throwing him in the middle of the trenches of World War I wearing boxing gloves, whereupon he is killed post-haste, and then saying “See, I told you that boxing is not a viable method of defending oneself.” I utterly despise Libertarianism (but I love you, **Rand**!), but I think this is true. I’m not saying it shouldn’t be discussed or something, just that as we do so, we realize the discussion is inherently unfair to Libertarianism. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [February 18, 2013, 2:38am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/26 "2013-02-18T02:38:48Z")
> [@msmith537](#): > > Does it matter that AIG has paid back the government with interest? > > What is the value in letting a company of 57000 people fail? I know all about “moral hazard”, but it’s a different story when you are talking about real jobs and real economic damage. This is the worst part of it. The whole concept was sold as protecting 57,000 jobs, but that’s false. Had they allowed AIG to go into bankruptcy protection, the company could have been carved up and the various divisions sold. The fact that the company managed to rebound proves this point. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [February 18, 2013, 2:52am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/27 "2013-02-18T02:52:09Z")
> [@septimus](#): > > I’m not sure what your focus is here, _but monopolies are a natural result of unrestrained capitalism_; you can see this historically: the East India Company, Standard Oil, etc. Before becoming TBGT Fail, they become TBGT compete with. (That Microsoft is losing power despite its monopoly is often cited as a counterexample, but Microsoft, unlike banks, needs to compete in an environment of rapid innovation.) > > IIRC, even Adam Smith espoused government regulations to impede monopolies. Do “Libertarians”? There are few, if any, historical examples of monopolies that did not come about because of government collusion. Look at your two examples. Are you seriously telling us that the EIC was “unrestrained capitalism”? Its history is littered with special charters granted by the state. And Standard Oil was drastically losing market share before it was broken up. It maybe had a “monopoly” for a few years, if that. When it was broken up in 1911, it’s market share was down to 60% from a high of 90% a few decades before. Keep in mind that there is no law against being a monopoly in the US. The laws are against “restraint of trade”. Hence MSFT, which has been much more of a monopoly than Std Oil ever was, is still MSFT. The government could not make a case of restraint of trade against it. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [February 18, 2013, 3:02am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/28 "2013-02-18T03:02:21Z")
[And it’s all still happening in secret](http://www.cnbc.com/id/100466032) ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 19, 2013, 3:56pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/29 "2013-02-19T15:56:35Z")
> [@emacknight](#): > > This is the worst part of it. The whole concept was sold as protecting 57,000 jobs, but that’s false. Had they allowed AIG to go into bankruptcy protection, the company could have been carved up and the various divisions sold. The fact that the company managed to rebound proves this point. The whole concept was sold as preventing AIG’s trouble with mortage securities from percolating through the entire global financial system. Declaring bankrupcy isn’t a magic panacea either. Lehman’s bankrupcy and subsequent breakup didn’t do the economy any favors. > [@emacknight](#): > > [And it’s all still happening in secret](http://www.cnbc.com/id/100466032) It’s not exactly a “secret” if it’s on CNBC. But your article does point to the inherent problem of “too big to fail”. When should the government step in? Why should AIG receive a bailout but not Lehman? Government involvement often has more to do with politics than good economic or business sense. ---
**Author:** ![newcomer](https://avatars.discourse-cdn.com/v4/letter/n/e5b9ba/32.png) [@newcomer](https://boards.straightdope.com/u/newcomer)\ **Post date:** [February 20, 2013, 3:27pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/30 "2013-02-20T15:27:55Z")
> [@msmith537](#): > > The whole concept was sold as preventing AIG’s trouble with mortage securities from percolating through the entire global financial system. > > Declaring bankrupcy isn’t a magic panacea either. Lehman’s bankrupcy and subsequent breakup didn’t do the economy any favors. > > It’s not exactly a “secret” if it’s on CNBC. > > But your article does point to the inherent problem of “too big to fail”. When should the government step in? Why should AIG receive a bailout but not Lehman? Government involvement often has more to do with politics than good economic or business sense. There’s a slight difference between Lehman and AIG - Lehman was performing illegal operation w.r.t. their securities and repo transactions. There is no protection against someone who wants to do something criminal. That’s partially why they were “allowed” to fail. On the other hand, are we now going to allow illegal actions just because economy would suffer? I mean, the significant portion of that economy was illegal and Ponzi bubble (as evidenced by pumped up bank’s balance sheet) so any argument that somehow thus created economy would suffer is a circular argument. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [February 21, 2013, 3:52pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/31 "2013-02-21T15:52:03Z")
While skimming this thread to gather material for my upcoming _Do Libertarians take Liberty with the Truth?_ thread in BBQ Pit, I came across this which I missed the first time: > [@emacknight](#): > > The whole concept [of government rescue of AIG] was sold as protecting 57,000 jobs … Do you have a cite for this? AIG was party to hugely many contracts with businesses and millions of individuals; allowing it to collapse in an uncontrolled fashion would, ISTM, have caused almost unimaginable turmoil. The government waited until it was clear that no “white knights” from the private sector were coming forth. I suppose saving jobs was mentioned (and have no doubt right-wingers seized on the meme ignorantly) but do you have any cite that it was a primary consideration, let alone “the whole concept” ? ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 21, 2013, 4:54pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/32 "2013-02-21T16:54:20Z")
> [@newcomer](#): > > There’s a slight difference between Lehman and AIG - Lehman was performing illegal operation w.r.t. their securities and repo transactions. There is no protection against someone who wants to do something criminal. That’s partially why they were “allowed” to fail. The Lehman Repo 105 accounting discrepencies didn’t come to light until 2010. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [February 21, 2013, 5:44pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/33 "2013-02-21T17:44:02Z")
> [@msmith537](#): > > The whole concept was sold as preventing AIG’s trouble with mortage securities from percolating through the entire global financial system. If that’s the case, why did you write this: > [@msmith537](#): > > What is the value in letting a company of 57000 people fail? I know all about “moral hazard”, but it’s a different story when you are talking about real jobs and real economic damage. This is a case where people use words like “fail” to give a very false impression of what’s involved when a company goes into bankruptcy protection. There is also a lot of excluded middle here, it wasn’t a case of either/or: full bail out vs uncontrolled collapse. ---
**Author:** ![Lightnin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lightnin/32/180_2.png) [@Lightnin](https://boards.straightdope.com/u/Lightnin)\ **Post date:** [February 21, 2013, 6:34pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/34 "2013-02-21T18:34:13Z")
> [@John\_Mace](#): > > There are few, if any, historical examples of monopolies that did not come about because of government collusion. This claim has never made any sense to me. Let’s say I get into making Widgets. There are three other companies (Allied Widgets, Bronsky Widgets, and Chuck’s Widget Warehouse) who also make Widgets- however, mine is better, and so I start selling more Widgets than the other guys. Allied Widgets finds that its market share is getting too small, and eventually has to fold. Bill Bronsky, the owner of Bronsky Widgets, decides to retire to Boca Raton, and sells me his assets. What’s to keep me from driving Chuck out of the Widget-making business, or buying him outright? After all, when I’m the only Widget company, my job is secure- nobody can afford to compete with me, and I’ve got all the customers I could ever need ('cause everyone needs a Widget). No government collusion, just a logical extension of capitalist principles. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [February 21, 2013, 6:44pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/35 "2013-02-21T18:44:09Z")
> [@Lightnin](#): > > No government collusion, just a logical extension of capitalist principles. It’s only logical if you exclude any possible alternative to the widget you produce. Historically when what you describe happens, by the time your company has a monopoly the world changed and no one wants a widget any more, then your monopoly is kind of pointless. Which I guess raises a second question: does it matter if you have a monopoly on something no one wants? I’m sure there are millions of those out there. ---
**Author:** ![jacobsta811](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jacobsta811/32/2893_2.png) [@jacobsta811](https://boards.straightdope.com/u/jacobsta811)\ **Post date:** [February 21, 2013, 7:49pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/36 "2013-02-21T19:49:04Z")
> [@Heracles](#): > > I heard a commentator on a BBC broadcast the other day, saying that insurance systems such as the FDIC actually contributed to the problem. The reasoning was that people would not have invested with these reckless banks if their money had really been at risk. > > I don’t agree with that assessment, but it sounded to me like a pretty Libertarian point of view. Hell, if you are speaking of CDs/Savings account, I _personally_ put money in with many of the banks that failed, to get higher interest rates. The banks generally managed to survive long enough to pay me back my 6 month CDs (the exception being Indymac, where I was paid by the FDIC instead). But I _knew_ that many of these banks were going to be gone in the long term but didn’t worry about it because of the FDIC. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 21, 2013, 9:02pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/37 "2013-02-21T21:02:40Z")
> [@emacknight](#): > > If that’s the case, why did you write this: > . Because I just write shit as I think of it? ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [February 21, 2013, 9:21pm UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/38 "2013-02-21T21:21:44Z")
> [@septimus](#): > > While skimming this thread to gather material for my upcoming _Do Libertarians take Liberty with the Truth?_ thread in BBQ Pit, I came across this which I missed the first time: Really? You have nothing else to do with your life besides start yet another pit thread? Is Thailand really that boring? And of course it’s about libertarianism, are there no other dead horses? Do you think there is anyone on this board that doesn’t already know what you think about libertarians and libertarianism? “Liberty with the Truth” sounds like a fun way of saying “libertarians lie!!!” ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [February 22, 2013, 12:23am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/39 "2013-02-22T00:23:17Z")
> [@emacknight](#): > > Really? You have nothing else to do with your life besides start yet another pit thread? Is Thailand really that boring? > > And of course it’s about libertarianism, are there no other dead horses? Do you think there is anyone on this board that doesn’t already know what you think about libertarians and libertarianism? So rather than defending the post of yours I questioned – which seemed to be made-up gibberish, unrelated to any valid interpretation of news reports (and your refusal to defend confirms that) – you chose to make a personal attack against me. Yes, you are a real knight, **emacknight**! 😃 ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [February 22, 2013, 1:00am UTC](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483/40 "2013-02-22T01:00:14Z")
> [@Heracles](#): > > I heard a commentator on a BBC broadcast the other day, saying that insurance systems such as the FDIC actually contributed to the problem. The reasoning was that people would not have invested with these reckless banks if their money had really been at risk. > > I don’t agree with that assessment, but it sounded to me like a pretty Libertarian point of view. Besides agreeing that investing in bank stock is not protected, this person must be unaware of what happened before the FDIC was started. The problem was not just the banks that made bad investments - depositors, seeing some banks failing and their depositors losing money, naturally decide to withdraw money from their perfectly healthy bank - and a run on it causes it to fail. I assure you that without the FDIC there would have been bank runs galore, just like in 1932. Knowing that the government will pay you your money in the last resort means you don’t have to worry, and thus no bank runs. It was my impression that local banks were a lot more sane in their investments than the non-insured mortgage companies. But even they got hit because of the crash in house values. And this case shows the solution to the TBTF problem. Banks, considered too big to fail in 1933, were insured but also regulated. That mitigates the moral hazard problem. We know what happens when you reduce regulation like they did during the Reagan/Bush I years. The banks, insured, take bigger risks for bigger stockholder rewards, until they crash and we are stuck bailing them out. [Previous page](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483.md?page=1) [Next page](https://boards.straightdope.com/t/what-do-libertarians-think-of-too-big-to-fail/650483.md?page=3)