COMMENT How long will the US economy live with a banking system in which some institutions are too big to fail ? Not long, we should all hope, because large banks today, under federal protection, can raise short-term funds more cheaply than their smaller competitors, which are allowed to fail.
“Too big to fail” is an unstable system. Politically inspired constraints on large banks leave them not knowing what will come next out of Washington, while there is no way of knowing whether any given bank is just small enough to be let go or will be bailed out if it gets into trouble.
