Too big to fail - Essay Example

Too big to fail The case is very much the same with the auto industry. For instance, let’s take the example of GM Motors. The government cannot allow these companies to fail, because if a big company like GM Motors fails, the whole chain of dealers and suppliers related to GM Motors or the auto industry will have to suffer and the consequences of this may be very severe for the government to bear. As far as the savings of people are concerned, they play an important part in the economic growth of any country.

The financial institutions should design and come up with policies that encourage the depositors to deposit their savings, so that more money is available with the financial institutions to lend for to businesses and people for investment purposes. The more money is available for investment purposes, the better it is for the economy and its economic growth. Banking and financial institutions are the backbone of any economy since they give out loans to businesses and people so that they could invest back in the economy, expand their businesses and increase economic activity in the country.

If businesses or other institutions fail to pay back their loans, this can have a serious impact on banking industry and they might have to file for bankruptcy etc. Since the banks are dependent on each other, the working of banking industry might get affected because of this, so to avoid taking risks such as these, the government is always there to support the banks and other financial institutions. I would like to conclude this essay by mentioning that the government cannot bear failure of any big institution as it’s after affects can be very severe for the economy and thus the government continues to support these big institutions.

(Montanarelli) Bibliography Montanarelli, Lisa. Too big to fail. 20 August 2009. 11 May 2012 .