If attention was to be given to the way that the government handled things, recently one would realize there is trouble forthcoming and they would notice the economic situation is going to become much worse in the coming times. The question this paper aims to answer is when the US government should bailout a company, and save it from bankruptcy. Recently more and more views tend to favor the answer of never. They should not in the first place, however, some companies become too big to collapse because of the damage that would cause.
Thus, in this view the US federal trade commission should hold a series of hearings on an annual basis. This would be to determine in their view if these so-called failing corporations have become too big to fail. If this happens to be true, instead of offering a bailout, they should consider other methods. These are such as dividing the company into smaller corporations in a system similar to the bell divesture system. However, the US government would not stand for this, even though it is more free market oriented than using taxpayer money to bail out billion dollar corporations.
The example in this case is the American international group or AIG. The US government seized control of the company in an 85 billion dollar deal that signaled the intense purpose it held for the company. In this case, the company was indeed too big to fail thus; the government took the lesser of two evils. The main thing is that banks and mutual funds are some of the major holders in the company’s debt. They would pay a heavy price if the insurer were to default on payments. The company had a huge role in the global economy, if there was trouble meeting its obligations, the ripple effect would possibly be felt around the world.