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Big Businesses and Recession Risks

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A long time ago, in a galaxy far, far away, there were businesses that were TOO BIG TO FAIL... Over the last five years we have seen a number of government interventions in operations deemed "too big to fail". Discuss.

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Lynch (2012) wrote that two years after President Barack Obama vowed to eliminate the danger of financial institutions that are too big to fail, the nation's largest banks are bigger than they were before the financial meltdown. Five banks JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs held more than $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve. That is up from 43 percent five years earlier.

Pressley (2010) mentioned that Alan Greenspan when told the dangers of outsized banking institutions replied back that "If they're too big to fail, they're too big".

So what to do with them, Greenspan blurted out "You know, break them up," and qualified the statement by saying that in 1911, we broke up Standard Oil. So what happened? The individual parts became more valuable than the whole (Pressley, 2010).

Greenspan's bold suggested could have made an ally with CEO Sandy Weill when he "publicly voiced the opinion that certain banks needed to be broken up" because "the merger of commercial banks with investment banks ...

Solution Summary

The solution discusses what to do to businesses that are too big to fail. It includes suggestion such as breaking big companies into smaller businesses so that investors/depositors will never be at risk.

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