“Too Big to Fail” Implies Another Problem

We hear the term “too big to fail” a lot in connection with banks these days. It brings up a thought.

If a business or bank is too big to fail, according to a government regulator’s premise, might it not be too big to manage in the first place? Perhaps the emphasis on size is misdirected when related only to the need for government oversight.

When corporate entities get that enormous, there usually are hidden management pitfalls that are almost impossible to recognize and avoid. Those resultant problems may involve more than conventional governmental regulation.

Example: Many commercial banks also are in the investment banking business. We know that. But there are aspects of investment banking that can veer off in varying directions, which I have always felt go beyond the normal skills of everyday managerial skills at those institutions. Those specialized skills are business-oriented and are wanting.

Problems encountered have little to do with the need for more regulation. In fact, the more regulation imposed, the more likely, management will fail.