Too Big to Fail：Too big to fail

Concept in economics

Headquarters of AIG, an insurance company rescued by the United States government during the subprime mortgage crisis

"Too big to fail" (TBTF) is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure.[1] The colloquial term "too big to fail" was popularized by U.S. Congressman Stewart McKinney in a 1984 Congressional hearing, discussing the Federal Deposit Insurance Corporations intervention with Continental Illinois.[2] The term had previously been used occasionally in the press,[3] and similar thinking had motivated earlier bank bailouts.[4]

The term emerged as prominent in public discourse following the global financial crisis of 2007–2008.[5][6] Critics see the policy as counterproductive and that large ban...