Too Big to Fail?

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This new idea of a company being too big to fail has got me really confused.  Fannie Mae, Freddie Mac, AIG, Chrysler, GM, etc. etc. etc.  Is the government just going to keep bailing out these companies with tax payer money?  If so, why?

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Our capitalist society is based on the idea that companies need to make money.  If they don’t they go under.  In this manner, companies spontaneously organize themselves in such a way that they make money or they do not survive.  It’s like Charles Darwin’s ideas of survival of the fittest.  Over time, evolution has favored characteristics which are more compatible with life.  In this manner, only the strongest are left.

If government keeps bailing out companies that cannot sustain themselves, there will be no real change.  Sure, the “Big 3” automaker CEO’s have offered their services for $1 a year.  If and only if the government gives them huge amounts of money to try to keep their companies afloat.  I think that this is a pretty grand gesture.  But more like a magician’s grand gesture.  They distract you with the $1 offer so that you forget that one of the CEO’s has made $50 million in the last two years while his company was losing billions, that’s right, billions of dollars.  Billions of dollars lost and the CEO’s are making personal flights with the company jets totaling more than I make in a year.  And that’s just for the flights that are labeled “personal”.  It’s sickening.

What would have happened if the government had decided to bail out companies that were making horse buggies?  They, of course, would have lost their money.  Right?  With the invention of cars, horse buggies were surely a losing venture.  The change would have happened slowly, over time while cars were evolving.  What the government is doing now is preventing change.  They are rewarding companies with failing business plans.  It’s like giving a kid a lollipop after he throws a temper tantrum.

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It will definitely be difficult in the short term to have major employers close their doors.  However, in the long term, the companies will either make it or they won’t.  New companies with better plans will develop or existing companies will expand.  There will be new and better ways discovered to make money.  We cannot keep propping up failing businesses with tax payer money claiming that it’s an “investment”.  It’s an investment in the same sort of way that playing slot machines for hours on end is.  Not much of an investment at all.

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