Re: Too big to fail?

["Steven M. Bellovin" <smb () research att com>]

In message <20010118205105.A1059 () localhost co-nectschools net>, Scott Brim writ
es:
> On Thu, Jan 18, 2001 at 04:31:58PM -0800, Sean Donelan wrote:
> > Remember during the last deregulation cycle.  When the Savings & Loan
> > and Bank industries were "deregulated" one open question was: are
> > there banks considered too big to fail.  The problem with that doctrine
> > is it warps management's risk analysis.  Instead of appropriate investments,
> > management makes excessively risky decisions in an attempt to achieve
> > short-term returns and maximize shareholder value.
> >
> > Is PG&E too big to fail?
>
> But what would that mean?  All the infrastructure is there, the only
> issues are cash flow and regulation of prices.  If PGE was diddling with
> its infrastructure, lending out towers to shady businesses and such,
> there might be a parallel :-).

During the 19th century, there were a number of railroad bankruptcies.  
The courts ruled that since all of their assets were good for only one 
thing -- a railroad -- the only choice was to keep the corporation 
going.

The real change, per the article I cited, is who makes the hard 
decisions.


                --Steve Bellovin, http://www.research.att.com/~smb