The myth of too big to fail

Too big to fail (TBTF) is a doctrine stipulating that big firms (particularly financial institutions) cannot be allowed to fail because of the potential adverse impact the failure may have on the rest of the sector and the economy at large. When they are in trouble, financial institutions utilise the language of fear to demand the privilege of TBTF at a significant cost to taxpayers. From the perspective of costs and benefits, the TBTF doctrine must go the way of the dinosaurs.