(Barth, 2). Banks are the businesses that are mostly associated with the TBTF because they are large corporations, and they tend to be very complex and bear great implications to the economy. When governments realize that big corporations like a bank is on the path of collapsing, they intervene to solve the problem, in order to prevent the impending danger to the economy. In the crises of 2007 to 2009, governments were forced to intervene and save the banks from collapsing. This paper looks at three articles that concern the TBTF problem and discusses them. In addition, the paper will discuss the remedies and also compare them.

Quantifying Europe’s “Too Big To Fail” a problem, is an article by Peter Eavis that occurred in The New York Times on the twenty-third of January, 2014. Eavis provides the case of European Banks, in reference to the Bank of Scotland, and argues that government efforts to stabilize the banking sector have not yielded much fruit. This, according to (Eavis 4), shows that European taxpayers would continue to dig deep in their pockets, to prevent the big lenders from collapsing. A report by analysts shows that, even though European banks are a bit stronger, they From then, the governments took measures meant to wind the banks down in order to avoid billing them. However, the bigness of these institutions has rendered the governments’ efforts futile. The burden is estimated to be billions of Euros. However, the article ends by acknowledging that it is possible for the government to level the playing field and have the problem prevented, instead of waiting for the problem, then strain tax-payers to save the banks.

“The Problem is bigger than the too big to fail” is an article by Jesse Eisinger that occurred in the ProPublica in December 11 of 2013. Eisinger talks of the financial litmus test provided by the Obama administration in the US economy in 2013 (Larry 3). The propositions of the financial overhaul were presented by Mr. Lew, the Us Treasury secretary, who declared that the US government had made tough choices to address the financial problem. However, Eisinger holds that the words of the secretary do not hold water, since he is addressing the issue about institutions that are very central to the government, that the government could not just watch them fall. Eisinger wonders how the government can just watch a bank falling and fail to take action, knowing very well that the falling of the banks will mean big losses to the shareholders. However, Eisinger supports that the government ought to be in a position to unwind an organization, as well as, its international operations. He agrees that such a problem that would bring down one bank is likely to be affecting all the banks at the same time, proving it hard for the government to intervene. Eisinger observes that the economy is overly financialised, and thus, the very best way to deal with the problem is not through tampering with the current system

‘Fed’s Lacker “Too Big To Fail” a problem is Alive and Well” is an article by Michael Derby. It occurred in the Wall Street Journal on February 12^th, 2014. to Fall a Problem”. The bank’s president was refuting the idea of enhanced regulations, and instead advocating for measures that would see support the market participants, and that would eliminate the expectations of government support. He proposes taking away of the emergency-lending capabilities of the Federal bank, though they were very helpful during the financial crisis. This would be done through repealing the Federal Bank’s emergency lending powers, with a view to limiting the government’s abilities in the provision of ad hoc rescues (Plosser 5). In this presentation, Mr. Lacker was speaking at Stanford University accompanied by Ms. Janet Yellen, the central bank chief, who assured the participants that they had hope with the strategy they were laying down that the economy would perform. The two were speaking in the second month after the Federal bank had reduced the monthly purchase rate from $75 billion to $65 billion.According to Mr. Lacker, the bond-buying habit of the central bank offers little benefits to it, and invites high rates of inflation to the country

Having looked at these three articles all about the “Too Big To Fall a Problem”, it is important that this discussion consider the remedies towards the problem. This part thus discusses the two main ways of solving the Too Big to Fail a problem. The first method of solving the Too Big toPlosser 2). The essence of this method is to make the financial system robust, in order to prevent the propagation of a financial problem that is affecting one of the firms to the other firms. An example is assisting firms to make over-the –counter derivatives through central counter-parties. The other way of ensuring this method works is stabilizing the tri-party repo-system through the major clearing banks and the federal bank. This also involves the money market mutual fund.

(Plosser 4). The main aim is to have a framework of a single point of entry, as it is proposed under the Federal Deposit and Insurance Corporation. This goes with the idea of placing a financial firm into receivership, where its assets are transferred to a bridge holding company. In such a case, the equity holders are wiped out. However, the subsidiaries of the firm continue to operate. This has the tendency to limit the incentives that can enable the customers to run. In this arrangement, the expected negative externalities are limited by making sure that the subsidiaries of the absorbed firm continues to operate and that they are able to provide critical services that they were meant to provide to the consumers.

The Federal Deposit Insurance Corporation appears the best method of dealing with the Too Big to Fail a Problem. This is because it is so far the best plan to implement title II. It is very suited to complex and large institutions like the U.S financial institutions. However, to ensure that the framework works better, the firm that will be received ought to be having some debt, which the Federal Deposit Insurance Corporation will convert to equity (Powell 3). This will help ensure that the newly-bridged company is well capitalized. This will then prevent any eventuality that can lead to the failure of such an organization. Also, the existence of a debt makes the new company viable in a competitive economy. However, although this plan is regarded the best, it has some challenges associated with it. These are realized in the implementation stage. The first concern is the difficulty that exists in entering in contract with firms governed by non-US law. Secondly, the firm that is placed under receivership can be disregarded, or be difficult to run by the holding company, leading to its failure.

Concerning regulation by the US congress, the congress passed the Dodd-Frank Act with a view to ending the Too Big to Fail a problem (Foerster 4). It was meant to provide a solution to this financially-related problem that has been a headache to many countries, especially during the financial crisis of 2007-2009. However, according to Foerster (5), the Act has not achieved much in dealing with the problem. Concerning the same, Dudley (4) agrees that the Act provides the best plan, but its implementation requires more work be done.

In conclusion, the Too Big to Fall a problem is still a thorny issue in the economy. The paper as looked at three newspaper articles about the problem, and they all concur that the problem is far from being solved. However, the paper has seen that the Dodd-Frank Act provides a good framework for solving the problem, though it requires more seriousness in the implementation.

Works Cited

Barth James, R,Prabha Apanard Swagel and Phillip. Just how big is the too big to fail problem? New York, NY: Milken Institute, 2012. Print.

Derby , Michael, S. ‘Fed’s Lacker “Too Big to Fail” a problem is Alive and Well’. The Wall Street Journal, Feb 12, 2014. Web. 27^th Feb. 2014

Dudley, William, C. ‘Ending Too Big to Fail’. Remarks at the Global and Economic Policy Forum New York City. New York, NY: Federal Reserve Bank of New York, 2013. Print.

Eavis, Peter. ‘Quantifying Europe’s “Too Big To Fail” problem’. The New York Times, 23th Jan, 2014, Print.

Eisinger, Jesse. “The problem is bigger than the too big to fail”. ProPublica, Journalism in the Public Interest, 11^th Dec, 2011. Web. 27^th Feb. 2014.

Foerster, Morrison. The Dodd-Frank Act, a cheat sheet. n.d. Web. 27^th Feb. 2014.

Larry, Wall, D. Too Big To Fail after the FDICIA. The Economic Review, 95(2010): 1-2. Print

The Clearing House. Title II of the Dodd-Frank Act and the Approach of ‘Single Point of entry’ private sector recapitalization of a failed financial company. The Clearing House, 2013, Print.

Plosser, Charles. Can we end Too Big to Fail? New York, NY: Federal Reserve Bank of Philadelphia, 2013. Print.

Powell, H. G. Ending Too Big to Fail. New York, NY: Board of Governors of the Federal Reserve System.

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