Niall Ferguson has a must-read report at the Centre for Policy Studies on the dangers of the Too Big To Fail (TBTF) mentality. Ferguson writes:
It is not often that I quote Lenin approvingly. But one of the lessons of the recent -- and in my view continuing -- financial crisis is that not everything the Marxists said was wrong, even if the normative conclusions they draw from their observations certainly were. As a believer in what Lenin disapprovingly called 'the capitalism of free competition,' I regard the emergence of excessively large, government-guaranteed financial conglomerates in a very different light - not as a prelude to socialism but as a massive distortion to the market, similar to that which Adam Smith deplored when he considered the role of quasi-governmental monopolies like the East India Company in his own time.
It was the East German communists, Ferguson observes, who identified "State Monopoly Capitalism," or Stamokap, as a "way-station on the road to 'real existing socialism.'" The danger today is that, through regulatory capture and the insidious relationship between Wall Street and the Treasury Department, policy makers and market incumbents are working together to enshrine Too-Big-To-Fail into law. Here's hoping the president and Congress read Ferguson before they make a mistake that's too big to undo.