Goldman 'Too Big to Fail'? History Shows There's No Such Thing

I have been reading and hearing a lot about the "too big to fail" (TBTF) theory in the mainstream media since the onset of the credit crisis. There is only one fundamental problem: Not one former TBTF-candidate has remained alive very long after the discussion has been started.

Since the South Sea Co. Ltd. was first TBTF, only to come down and take the better part of England in the South Sea Bubble with it, there is not a single grain of proof that would hold me back from officially burying the TBTF-theory for what it really is: an urban myth.

Uncountable financial corpses like Continental Illinois in the early 1980s, Long Term Capital Management in the late 1990s and not too long ago, Lehman Brothers, litter the road of economic disaster. Find a timeline of most recent TBTF events here.

This series may be continued with Goldman Sachs (GS). At least there is no historical precedent saying otherwise and the TBTF discussion has just been given a new breather by Zerohedge's refreshing spate of documents, with an interesting answer by Kid Dynamite. As Reuters blogs/commentaries have started the timeline, also eagerly documented by Karl Denninger, who served the blogosphere more Goldman chutney on Monday, I may add that they may be onto something, this guess based on the historically non-proven TBTF theory.

Comments

[whidbey:]

God almighty be careful!! I know your analysis could be right, but think of the implications if it comes to be.

It means the failure of the last of the great and mighty financial firms (the death of Wall Street in some sense), the treasury department might become dysfunctional (or more so), many of the sub posts at state and agencies would be colorless and disconnected if they lost the progeny of GS. It would be like taking the Star Spindled Banner off the play list. It could be the end. I think it is worth trying. Count me in.

Jul 06 09:30 PM

[ken3602:]

There is a big difference between 'too well-connected to fail' and simply 'too big to fail'. When you don't even have to lobby because US treasury department and the Fed are like... your own family, it is not about a size of the firm anymore. It is possible some other company could become very powerful and replace GS, but until then, GS will get whatever they want whenever they need to.

Jul 06 10:46 PM

[ain't no fo...:]

I wouldn't be surprised if that pop in the SPX, NYSE and DJIA at around 3:40 today was an "in your face" by GS to all its many detractors.

Jul 06 11:19 PM