TBTF-Theory Not Reflected in History Books

Monday, July 06, 2009

Observing nowadays' financial news I notice to have been reading and hearing a lot about the "too big to fail" (TBTF) theory since the onset of the credit crisis. There is only one fundamental problem: Not one former TBTF-candidate has remained alive much longer once this discussion had been started.
Since the South Sea Co. Ltd. was first TBTF, only to come down and take the better part of England in the South Sea Bubble with it, there is not a single grain of proof that would hold me back from officially burying the TBTF-theory as what it really is: an urban myth.
Uncountable financial corpses like Continental Illinois in the early 1980s, Long Term Capital Management in the late 1990s and not too long ago, Lehman Brothers, litter the road of economic disaster. Find a timeline of most recent TBTF events here.
This series may be continued with Goldman Sachs. At least there is no historical precedent saying otherwise and the TBTF discussion has just been given a new breather by Zerohedge's refreshing spate of documents, with an interesting answer by Kid Dynamite. As Reuters blogs/commentaries have started the timeline also eagerly documented by Karl Denninger, who served blogosphere more Goldman chutney on Monday, I may add that they may be onto something, this guess based on the historically non-proven TBTF theory.

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