The U. S. President has proposed that the antidote to the problem of companies growing too big to fail is to shrink them. Goodbye future Microsofts and Walmarts.
However, I remain unconvinced that any company is too big to fail. I found the perfect counterexample.
The twin towers of the World Trade Center was the nexus of the entire financial world. Surely the destruction of the twin towers, along with systems and trained personnel would plunge the financial system into chaos. Surely the twin towers were too big to fail.
The towers went down in September 2001. The third quarter of 2001 did experience negative growth. Though the economy had struggled before the towers were destroyed, the recession ended in the fourth quarter of 2001.
The total collapse of the financial nexus of the world did not wreck the world financial system, or even the U. S. financial system.
Is AIG too big to fail?