“Too Big to Fail” Is Too Big

If a bank, or any business, is too big to fail, according to a government regulator, it might also be too big to manage.

Perhaps the emphasis on size is misdirected when related only to the need for government oversight.

When corporate entities get gigantic, there usually are hidden management problems that are almost impossible to recognize and avoid.Those may involve more correction than possible from conventional governmental regulation.

Example: Many commercial banks also are in the investment banking business. 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 not usually the skills attained by investment bankers.

Problems encountered have little to do with the need for more regulation. In fact, the more regulation, the more likely management will fail. (See the Earl J Weinreb NewsHole® comments.)