The phrase "too big to fail" is too often used to describe why various companies should receive bailouts from the federal government. Some financial companies are allegedly too big to fail because if they do fail it would create a series of failures as those who do business with the failing companies would be hurt by the failure of the initial company. Some automobile companies are allegedly too big to fail because if they do fail then parts suppliers and dealerships would all fail as well.
Perhaps it is time to introduce a new phrase into the national lexicon, "to big to succeed." A company is too big to succeed if it grows so big that it cannot make a profit anymore, and as a result it must fail.
What about the domino effect of dependent companies. They are part of the "to big to succeed" model, because their success is entirely dependent on a failed company. If someone is betting that a company that is bleeding money will succeed, that someone should lose the bet.
There is no way to turn a failed model into a successful model without changing the model. There is no way to turn a failed company into a successful company without liquidating the losses. Making the company bigger only makes the failure bigger.
A bigger failure needs more bailouts to keep from liquidating, but those bailouts do not change the model – they do the reverse. They save those in charge of the failure from having to adjust their behavior.
Let AIG fail, because it is too big to succeed. Then go on to bigger failures, such as the State of California, and eventually to the United States Government itself.