Introduction to the Concept of ‘Too Big to Fail’
The term “too big to fail” (TBTF) refers to a corporation or financial entity that is so interconnected within an economy that its failure would have catastrophic consequences. The phrase gained prominence during the 2007-2008 global financial crisis when governments worldwide intervened to prevent the collapse of key institutions and industries. Understanding the concept of TBTF requires exploring its origin, historical context, and contemporary implications in finance and investment.
The term “too big to fail” has deep roots in the banking sector, with its first recorded use during a 1984 congressional hearing regarding the intervention of the Federal Deposit Insurance Corporation (FDIC) in the Continental Illinois Bank. However, it wasn’t until the 2007-2008 crisis that the term became a common phrase to describe entities whose failure could cause extensive damage to the economy and warrant government bailouts.
This section will delve into the concept of too big to fail, discussing its historical context, how it was manifested during the global financial crisis, and the regulatory reforms put in place to mitigate future risks.
Historically, the term “too big to fail” has been used to describe institutions whose collapse would lead to significant economic consequences. However, the term became a pressing concern during the late 20th century when financial products and risk models evolved, exposing unknown consumer and economic risks. The 2007-2008 financial crisis demonstrated just how crucial it was for governments to intervene in preventing a potential collapse of key financial institutions to protect the broader economy from devastating consequences.
The U.S. government responded by passing the Emergency Economic Stabilization Act (EESA) of 2008, which included the Troubled Asset Relief Program (TARP). This legislation authorized the purchase of distressed assets to stabilize the financial system and provided funds for mortgage-related issues, allowing the U.S. government to prevent a widespread collapse of major banks and financial institutions.
To ensure that such a crisis would not occur again, new regulations were imposed under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This legislation focused on capital requirements, consumer lending practices, and the creation of the Consumer Financial Protection Bureau (CFPB) to prevent another financial disaster and regulate financial institutions more stringently.
In this section, we will delve deeper into the concept of too big to fail and explore its historical context, the role of regulations like Dodd-Frank and TARP, instances of companies deemed too big to fail, global regulatory reforms, and criticisms surrounding this theory. By understanding the implications of too big to fail, readers can develop a more comprehensive grasp of financial stability, government intervention, and the role of regulators in protecting consumers and the economy from potential risks.
The Global Financial Crisis: Causes and Effects
In late 2007, cracks began to surface in the United States housing market. The subprime mortgage crisis was unfolding, triggered by a series of unsustainable financial practices and unrealistic expectations. As homeowners struggled with mounting debts and rising interest rates, the contagion spread across the Atlantic, engulfing global markets. By September 2008, the once-unshakeable edifice of the financial sector started to tremble. Lehman Brothers, a venerable investment bank, filed for bankruptcy, marking the tipping point of the crisis. The ripple effect was swift and devastating—stock markets plummeted, credit dried up, and economies faltered worldwide.
The consequences were catastrophic. Millions lost their jobs, and trillions in wealth evaporated. The housing bubble bursting had triggered a global financial meltdown, leading to an economic recession that lasted over eight years. Governments and central banks intervened with massive stimulus packages to prevent the situation from spiraling further into chaos.
In the United States, Congress passed the Emergency Economic Stabilization Act (EESA) in October 2008, establishing the Troubled Asset Relief Program (TARP). This $700 billion initiative authorized the U.S. government to purchase distressed assets from struggling financial institutions and stabilize the banking sector. The objective was to restore liquidity and prevent a complete collapse of the financial system.
As banks struggled, other sectors came under pressure. In the automotive industry, General Motors (GM) and Chrysler needed support to avoid bankruptcy. The insurance sector was also in turmoil; AIG faced potential insolvency due to its massive exposure to credit default swaps and subprime mortgage-backed securities.
In response to these unprecedented events, the government stepped up with financial aid for the troubled sectors. GM received a bailout package to avoid bankruptcy, while AIG was saved through a government rescue in the form of a loan guarantee. The U.S. Treasury and Federal Reserve acted swiftly to prevent a systemic collapse that could have had severe consequences for the entire economy.
The crisis exposed weaknesses in the financial system and called for reforms. Regulatory bodies like the Dodd-Frank Wall Street Reform and Consumer Protection Act were passed to mitigate risks, prevent future crises, and protect consumers. The act imposed higher capital requirements on banks, created new regulatory frameworks, and strengthened risk management practices.
The term “too big to fail” emerged during this period, describing large financial institutions whose collapse would have significant implications for the economy. Government bailouts were implemented to prevent a potential catastrophe from unfolding. The crisis led to a shift in perspective regarding the role of government intervention in the financial sector and the importance of addressing systemic risks.
The Role of Regulations and Acts: Dodd-Frank and TARP
In response to the global financial crisis that began in 2007 and intensified in 2008, the U.S. government implemented a series of regulations aimed at addressing systemic risk within financial institutions. The most prominent pieces of legislation were the Emergency Economic Stabilization Act (EESA) of 2008 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The Emergency Economic Stabilization Act, also known as the Troubled Asset Relief Program (TARP), was a financial bailout program signed into law on October 3, 2008. The program allowed the U.S. Department of the Treasury to purchase or insure up to $700 billion in “troubled assets,” primarily mortgage-backed securities and other debt instruments issued by banks and financial institutions.
The main objective was to stabilize the financial system, prevent a further decline in asset values, and restore market confidence following the failure of several major investment firms, such as Lehman Brothers, Bear Stearns, Washington Mutual, and Wachovia. The TARP funds were also used to recapitalize banks through equity purchases or preferred stock conversions.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was a sweeping piece of financial reform legislation signed into law on July 21, 2010. It established the Consumer Financial Protection Bureau (CFPB) to protect consumers from abusive practices in mortgages, credit cards, payday loans, and other consumer transactions. The legislation also addressed systemic risk by requiring banks with more than $50 billion in assets to register as systemically important financial institutions (SIFIs).
The Dodd-Frank Act imposed new regulations on SIFIs, including higher capital requirements and enhanced supervision. These provisions aimed to reduce the likelihood of future bailouts while ensuring that large financial institutions continued to operate under sound risk management practices. Some critics argue that these regulations burden smaller financial institutions that did not contribute to the crisis.
The Dodd-Frank Act also established the Orderly Liquidation Authority (OLA), which enables the FDIC or the Federal Reserve to wind down a failing financial institution in an orderly manner while minimizing disruptions to the financial system and maintaining market stability. This provision is intended to reduce the likelihood of future taxpayer-funded bailouts by allowing regulators to address insolvency without relying on TARP-like programs.
The Dodd-Frank Act’s implications for the financial industry are significant, as it fundamentally changed the regulatory landscape and instilled a greater focus on risk management and capital adequacy. While some argue that these regulations impose unnecessary burdens on smaller financial institutions, they have effectively addressed systemic risk within the financial sector and reduced the likelihood of another financial crisis.
Companies Deemed Too Big to Fail
The term “too big to fail” came into prominence during the 2007-2008 global financial crisis when numerous banks and corporations required government intervention to prevent a catastrophic economic downturn. These entities, considered systemically important, have a significant impact on the economy, making their collapse potentially detrimental if they fail. Several large Wall Street banks were among those labeled ‘too big to fail.’
One of the most prominent examples includes Lehman Brothers, which collapsed in September 2008 after its debts became unmarketable due to a lack of confidence from investors. This event marked the beginning of the financial crisis and led to the intervention by the U.S. government through the Emergency Economic Stabilization Act of 2008 (EESA) in October 2008. The legislation authorized the purchase of distressed assets by the U.S. Treasury, known as the Troubled Asset Relief Program (TARP), to stabilize the financial system and prevent further damage.
Beyond Wall Street banks, other entities were also deemed “too big to fail” and received government assistance. Among these were General Motors (auto company), AIG (insurance company), Chrysler (auto company), Fannie Mae (government-sponsored enterprise), Freddie Mac (GSE), GMAC, which is now Ally Financial, and a few others.
Following the financial crisis, numerous reforms were introduced to prevent future bailouts of the financial system. One of these was the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The legislation imposed new regulations on capital requirements, proprietary trading, and consumer lending practices, requiring banks to hold larger financial reserves and maintain higher-quality assets. Additionally, the Consumer Financial Protection Bureau (CFPB) was established to address mortgage lending practices and make it easier for consumers to understand mortgage agreements.
However, critics argue that these regulations burden smaller financial institutions and U.S. firms, potentially harming their competitiveness. In response to this criticism, some provisions of Dodd-Frank were loosened in 2018 with the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act.
As a result, several banks that have been labeled as “too big to fail” include Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corp., and Wells Fargo & Co. These institutions have a significant impact on the U.S. economy and their failure could pose a risk to financial stability, making it crucial for governments to consider intervention when necessary.
Bank Reform and Consumer Protection: The FDIC and CFPB
The financial crisis of 2007-2008 led to the creation of new regulatory measures to protect consumers and mitigate potential future crises. Two prominent agencies, the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB), play crucial roles in ensuring that the financial sector operates in a safe, efficient, and transparent manner.
Established in 1933 as part of the New Deal legislation following the Great Depression, the Federal Deposit Insurance Corporation (FDIC) was designed to instill confidence in Americans by providing deposit insurance for individual accounts up to $250,000 per depositor. This insurance protects consumers from losses due to bank failures and helps maintain financial stability. In 1934, the FDIC was authorized to regulate and supervise banks, ensuring compliance with specific safety and soundness standards.
During the 21st century, new challenges arose in the banking sector. Financial institutions developed complex financial products and risk models that were unimaginable during the Great Depression era. The 2007-2008 financial crisis exposed significant consumer and economic risks that regulators had not anticipated.
To address these shortcomings, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was passed, which imposed new regulations on banks collectively referred to as Systemically Important Financial Institutions (SIFIs). The act introduced the Consumer Financial Protection Bureau (CFPB), designed to protect consumers from unfair, deceptive, or abusive financial practices.
The Dodd-Frank Act mandated higher capital requirements for SIFIs, ensuring that they have sufficient financial reserves in case of distress within the bank or the wider financial system. The FDIC plays a crucial role in implementing and monitoring these regulations to maintain a stable banking sector and safeguard consumer interests.
The Consumer Financial Protection Bureau (CFPB) was established to implement mortgage lending practices that make it easier for consumers to understand mortgage agreements. Following the subprime mortgage crisis, this agency helped prevent future crises by ensuring that financial institutions follow transparent and fair practices when dealing with consumers.
Critics have argued that regulations such as Dodd-Frank could harm the competitiveness of U.S. firms, particularly smaller financial institutions, which did not contribute to the crisis. However, regulatory compliance requirements are essential for maintaining financial stability and protecting consumers from potential risks in the banking sector. The Consumer Financial Protection Bureau (CFPB) is tasked with ensuring that consumers are protected from deceptive or abusive practices, providing transparency, and promoting fairness in the financial services market.
In summary, the FDIC and CFPB play essential roles in safeguarding consumer interests, maintaining financial stability, and protecting against potential risks to the U.S. economy. The Dodd-Frank Act introduced new regulations aimed at addressing the shortcomings of the banking sector and ensuring that consumers are protected from future crises. By implementing these measures, regulatory bodies like the FDIC and CFPB help mitigate the risk of financial instability and protect the wider American public.
Criticism Towards Too Big to Fail Theory
While the term ‘Too Big to Fail’ (TBTF) has been used in various contexts, its most recent notoriety stems from the 2007-2008 global financial crisis. The concept of TBTF refers to businesses or sectors whose collapse would cause extensive economic damage and could potentially trigger a systemic risk. Consequently, governments step in with bailouts to prevent widespread financial turmoil. However, this phenomenon has raised concerns among critics who argue that such interventions hinder competition and unfairly burden smaller financial institutions.
One of the main criticisms levied against TBTF is its potential impact on U.S. firms’ competitiveness. Critics argue that regulations designed to prevent future bailouts might create an uneven playing field for businesses, particularly those deemed too big to fail. This argument is based on the idea that large financial institutions enjoy a competitive advantage due to their perceived immunity from financial crises and subsequent government intervention.
Furthermore, smaller financial institutions and community banks have expressed concern about the increased regulatory burden resulting from TBTF measures. These institutions did not play a significant role in causing the 2007-2008 financial crisis. However, they are subjected to similar regulations as larger institutions, which can hinder their competitiveness and growth.
One of the most debated issues is the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. The act was created to address the financial crisis by implementing new regulations for banks and other financial institutions, including higher capital requirements and enhanced supervision. However, critics argue that these measures might place an unnecessary burden on smaller institutions and stifle innovation within the financial sector.
The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 partially addressed some of the concerns by providing relief to certain smaller financial institutions from specific Dodd-Frank provisions. This act aimed to ease regulatory compliance requirements for smaller institutions, enabling them to compete more effectively in the marketplace.
However, it is important to note that TBTF is not a new concept; it was first mentioned in a 1984 congressional hearing by U.S. Rep. Stewart McKinney (R-Conn.) regarding the intervention of the Federal Deposit Insurance Corp. (FDIC) with the Continental Illinois bank. The term became more widely known during the global financial crisis of 2007-2008, when Wall Street received a government bailout through the Emergency Economic Stabilization Act of 2008 and the Troubled Asset Relief Program (TARP).
In summary, while critics argue that the TBTF theory can negatively impact U.S. firms’ competitiveness and unfairly burden smaller financial institutions, it is essential to consider its historical context and the potential risks involved in allowing large financial institutions or sectors to fail. Regulations have been put in place to protect against these risks, including capital requirements and enhanced supervision for systemically important financial institutions (SIFIs), as well as the establishment of the Consumer Financial Protection Bureau (CFPB) to address subprime mortgage lending practices. However, it is crucial to strike a balance between preventing future financial crises and fostering a competitive financial sector that benefits all market participants.
The Historical Precedent: Too Big to Fail Before 2008
The term ‘too big to fail’ emerged as a prominent phrase during the 2007–2008 financial crisis, but it wasn’t a new concept. Rep. Stewart McKinney (R-Conn.) used this term in a 1984 congressional hearing when discussing the intervention of the Federal Deposit Insurance Corp. (FDIC) with the Continental Illinois bank.
In the 1930s, the FDIC was established to monitor banks and insure deposits, providing Americans with confidence that their savings would be safe. However, as financial institutions grew in size and complexity, new challenges arose. In the 21st century, banks had developed financial products and risk models that were unimaginable during the Great Depression. The unknown consumer and economic risks exposed by the 2007–2008 crisis forced regulators to re-evaluate their approach to banking reform.
Before the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which was created to help prevent future bailouts, global regulators implemented various measures aimed at addressing too big to fail institutions. The Basel Committee on Banking Supervision, Bank for International Settlements, and Financial Stability Board led these efforts.
Global financial reform targeted systemically important financial institutions (SIFIs), such as Mizuho, the Bank of China, BNP Paribas, Deutsche Bank, Credit Suisse, and others. The objective was to prevent future financial disasters by imposing regulations, including higher capital requirements and resolution regimes for these SIFIs.
As history shows, some entities were indeed too big to fail. During the 2007-2008 crisis, banks such as Bank of America Corp., The Bank of New York Mellon Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corp., and Wells Fargo & Co. were deemed critical to the stability of the U.S. financial system. Additionally, General Motors (auto company), AIG (insurance company), Chrysler (auto company), Fannie Mae (government-sponsored enterprise (GSE)), Freddie Mac (GSE), and GMAC—now Ally Financial (financial services company) required government intervention.
Understanding the historical context of too big to fail helps us appreciate the importance of financial regulation and its role in preserving economic stability. By acknowledging past events and learning from them, we can better prepare for the challenges that may lie ahead in the ever-evolving landscape of finance and investment.
Global Financial Reform: Basel Committee and FSB
The 2007-2008 global financial crisis compelled regulatory bodies worldwide to implement reforms. The Basel Committee on Banking Supervision, Bank for International Settlements (BIS), and the Financial Stability Board (FSB) took a leading role in addressing the root causes of the crisis and preventing future disasters.
The Basel Committee on Banking Supervision, founded in 1974, is a global forum where central banks, supervisors, and financial institutions discuss banking supervisory issues. Following the financial crisis, it developed new capital adequacy requirements to strengthen the regulatory framework for international banks. Basel III is the third iteration of the original Basel Accord, which was first introduced in 1988. The updated regulations focus on enhancing banks’ risk-absorbing capacity and improving market discipline by increasing regulatory transparency and imposing higher capital requirements.
The Bank for International Settlements (BIS) is an international organization that plays a key role in providing central banking services, facilitating cooperation among its members, and promoting financial stability. The crisis highlighted the importance of central banks acting together to address global financial risks. In response, BIS became instrumental in creating the FSB and collaborating with other institutions like the IMF and World Bank on coordinated international responses.
The Financial Stability Board (FSB), established in April 2009 by the G-20 leaders, is an international organization that monitors and makes recommendations to promote financial stability. The FSB identifies, assesses, and addresses vulnerabilities affecting the global financial system. It also coordinates crisis management efforts among member countries and collaborates with other international organizations like the IMF and BIS.
After the crisis, the FSB introduced several new reforms aimed at strengthening the regulatory framework for global banks. Some significant initiatives include:
1. The Key Attributes of Effective Resolution Regimes for Financial Institutions
2. The Global Systemically Important Financial Institutions (G-SIFIs) regime
3. The Leverage Ratio, which sets a minimum requirement for a bank’s capital relative to its assets
4. The Net Stable Funding Ratio, which ensures banks have sufficient stable funding sources to meet their obligations during periods of stress
5. The Liquidity Coverage Ratio, which requires banks to maintain enough high-quality liquid assets to cover short-term liabilities during a 30-day liquidity stress test
In conclusion, the Basel Committee on Banking Supervision, Bank for International Settlements (BIS), and the Financial Stability Board (FSB) have played crucial roles in implementing reforms following the 2007-2008 financial crisis. These organizations collaborate to address vulnerabilities affecting the global financial system, monitor systemically important financial institutions (G-SIFIs), and ensure that regulatory frameworks are robust enough to minimize future crises.
Protections Against Too Big to Fail: Regulations and Capital Requirements
The global financial crisis in 2007–2008 exposed significant vulnerabilities within the banking sector, leading governments to enact new regulations designed to minimize the risk of future crises. One of these measures was the implementation of stricter capital requirements and resolution regimes for systemically important financial institutions (SIFIs).
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is a comprehensive regulatory overhaul that aimed to address the risks posed by too big to fail banks. This legislation required banks to maintain higher levels of capital, limiting their ability to take on excessive risk and reducing the likelihood that taxpayers would be forced to bail them out in times of financial distress.
The Act also introduced new regulations regarding proprietary trading and consumer lending practices. Dodd-Frank imposed stricter requirements for banks labeled as systemically important financial institutions (SIFIs), which include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corp., Wells Fargo & Co., Goldman Sachs Group Inc., and other major financial players.
Regulatory bodies like the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) were tasked with ensuring that banks adhered to these new regulations. The FDIC, established in 1933, insures individual accounts in member banks for up to $250,000 per depositor and monitors banks’ financial stability.
The CFPB was created as a response to the subprime mortgage crisis that occurred during the same period and addressed consumer lending practices, making it easier for consumers to understand mortgage agreements and reducing the risks of predatory lending practices.
However, critics argue that these regulations have negatively affected the competitiveness of U.S. firms, particularly community banks and smaller financial institutions that did not contribute significantly to the 2007-2008 financial crisis. Some argue that regulatory compliance requirements unduly burden these smaller entities and limit their ability to compete with larger banks.
Regulatory bodies, such as the Basel Committee on Banking Supervision, the Bank for International Settlements, and the Financial Stability Board, have also implemented global reforms in response to the crisis, focusing on financial institutions labeled too big to fail and adherence to capital adequacy ratios. These entities include Mizuho, the Bank of China, BNP Paribas, Deutsche Bank, and Credit Suisse.
The term “too big to fail” was not coined during the 2007-2008 crisis but gained widespread popularity due to the government bailouts of several financial institutions during this period. The concept has a historical precedent, with the Federal Deposit Insurance Corporation (FDIC) intervening in the case of Continental Illinois Bank in 1984.
To prevent future crises and protect the economy from potential catastrophic consequences, governments have implemented regulations such as capital requirements, resolution regimes, and regulatory oversight for systemically important financial institutions. These measures aim to ensure that financial institutions maintain adequate levels of capital and follow sound business practices, reducing the likelihood of a taxpayer-funded bailout in times of distress.
In conclusion, understanding the concept of too big to fail and its implications is crucial for investors, regulators, and policymakers as they navigate the complex world of finance and investment. The regulations implemented after the 2007-2008 financial crisis have significantly impacted the banking sector, with stricter capital requirements, enhanced regulatory oversight, and increased public awareness of risks associated with too big to fail institutions. As we move forward, it is important for stakeholders to remain vigilant and continue to explore ways to mitigate the risks posed by these institutions while fostering a competitive banking sector that benefits consumers and the broader economy.
FAQs on Too Big To Fail: Government Interventions and Future Implications
Understanding too big to fail refers to a company or sector whose collapse could cause catastrophic damage to the economy, prompting government intervention through bailouts to prevent widespread economic chaos. The term gained notoriety during the 2007-2008 financial crisis when institutions like Lehman Brothers and Bear Stearns faced insolvency. In response, the U.S. government passed the Emergency Economic Stabilization Act (EESA) in October 2008, which included the $700 billion Troubled Asset Relief Program (TARP) to purchase distressed assets and stabilize the financial sector.
Q: What is the definition of too big to fail?
A: Too big to fail refers to a corporation or financial entity deemed essential to maintaining economic stability, whose failure would result in significant consequences for the broader economy.
Q: How does the government decide which companies are too big to fail?
A: The U.S. Federal Reserve and other regulatory bodies evaluate potential systemic risks that may impact the overall financial system if a company or sector were to fail.
Q: What were some historical precedents of too big to fail?
A: The term gained prominence following the 2007-2008 financial crisis, although it had been used earlier in the context of banking regulation, such as when Rep. Stewart McKinney discussed the intervention of the Federal Deposit Insurance Corp. (FDIC) with Continental Illinois Bank in a 1984 congressional hearing.
Q: What were some criticisms of too big to fail?
A: Critics argue that government bailouts may create moral hazard, where market participants are incentivized to take on excessive risk knowing they will be rescued. Moreover, smaller institutions and competitors bear the burden of regulatory compliance costs, potentially hampering their growth.
Q: What reforms have been implemented in response to too big to fail?
A: Following the financial crisis, new regulations like the Dodd-Frank Wall Street Reform and Consumer Protection Act were passed to prevent future bailouts by imposing higher capital requirements on systemically important financial institutions (SIFIs) and implementing reforms to mortgage lending practices.
Q: What are some examples of companies considered too big to fail?
A: Companies deemed too big to fail during the 2007-2008 crisis included Wall Street banks like Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley. Other entities that received government assistance were General Motors (auto company), AIG (insurance company), Chrysler (auto company), Fannie Mae (government-sponsored enterprise), Freddie Mac (GSE), and GMAC (financial services company).
Q: What are the implications for taxpayers?
A: Government bailouts, such as TARP, can result in significant costs borne by taxpayers. However, some argue that these interventions may prevent greater economic devastation.
Q: What is the future outlook of too big to fail?
A: The long-term implications of too big to fail are subject to debate. Some believe that regulatory reforms like Dodd-Frank have minimized risks and prevented a repeat of the 2007-2008 crisis, while critics argue that new regulations may stifle competition and incentivize riskier behavior.
Q: Can too big to fail occur in other industries?
A: Yes, any industry or sector whose failure could significantly impact the economy, such as transportation or energy, may be considered too big to fail.