In the fall of 2007, when the U.S. economy first seemed in peril, I began answering reader queries here on the Business Desk. I still do so, but this page has expanded to include posts from eminent economists, "far-flung correspondents," and a variety of voices that have intriguing and/or useful things to say about economics, broadly defined. Please feel encouraged to respond to any and all of them.
Did the Government Used to Break Up Companies for Being Too Big to Fail?
Name:
Tom
City & State:
Big Fork, Mont.
Question: In the '50s and '60s, big companies were broken up if they became too big -- like Ma Bell into the regional baby bells. GM was on the threshold of being broken up. I guess this was the federal government keeping these companies from becoming "too big to fail". What policy or sequence of events stopped that oversight and gave us too-big-to-fail financial companies?
Paul Solman: The reasoning behind the break-up of Ma Bell in the '80s or Standard Oil a century ago was anti-competitive practices, not Too Big to Fail. The movement was called "trust busting" in the days of Teddy Roosevelt and John D. Rockefeller because the giant firms were "trusts" that monopolized their markets and thus supposedly forced consumers to pay higher prices while stifling new competitors and innovation.
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Did the Government Used to Break Up Companies for Being Too Big to Fail?
**Question:** In the '50s and '60s, big companies were broken up if they became too big -- like Ma Bell into the regional baby bells. GM was on the threshold of being broken up. I guess this was the federal government keeping these companies from becoming "too big to fail". What policy or sequence of events stopped that oversight and gave us too-big-to-fail financial companies?
**Paul Solman:** The reasoning behind the break-up of Ma Bell in the '80s or Standard Oil a century ago was anti-competitive practices, not Too Big to Fail. The movement was called "trust busting" in the days of Teddy Roosevelt and John D. Rockefeller because the giant firms were "trusts" that monopolized their markets and thus supposedly forced consumers to pay higher prices while stifling new competitors and innovation.
