AIG, the government, and more…

After reading the AIG case and presenting on it last week, I have a hard time understanding how companies can keep at it the way they are these days with the mindset that they will never have any problems or ever be caught by the authorities. Companies and company executives may not think exactly like this, but I feel like businesses these days think that a failure won’t happen to them or if it did, they would be easily bailed out by the government like a lot of other companies when the recession occurred.  I have a hard time understanding how companies can not learn from their own past mistakes or from other companies past mistakes.

AIG and Enron are two great cases for others to take something away from.  They both made many mistakes that cost them in the long-run and other companies should be able to learn from these to prevent themselves from having the same outcome as AIG and Enron.  Part of being a company or business today should mean learning from the past mistakes from others in order to better your own business or company as a whole.  Maybe money is too big of a factor in today’s world and that might be the one downfall of the “too big to fail” companies these days.

If they are “too big to fail,” then do they think of smaller companies as too small to succeed? Describing a company as “too big to fail” can have many consequences on smaller business, or there may be benefits too.  When AIG failed, were there smaller companies that were able to step up and take their place in the industry?  Or was AIG irreplaceable and that’s another reason that it was bailed out? Can the government really make these assumptions or reason their bailouts with things like “too big to fail” or systemic risk? I believe the government has a large job and many responsibilites, but I am not sure if they should have the ability to bailout multiple companies in a time of recession and little money throughout the country.

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3 Responses to AIG, the government, and more…

  1. kjc013 says:

    I think the concept of a company being “too small to succeed” is a very interesting one. It brings up the question of whether smaller companies will have no chance of success with so many massive corporations in the world today. It is disheartening to think that only the largest companies will get bailed out in the time of recessions. How does the government choose who is worthy of remaining afloat? Just because a business is smaller, does that mean it isn’t as valuable to the United States, or even to the world?

  2. eeewald says:

    I completely agree with you. What makes these companies so irreplaceable? Why can’t we give some of these smaller companies a chance to fill the void left behind by these huge companies who obviously can’t run themselves. At some point in the past these “too big to fail” companies were small, they didn’t simply appear one day as major forces in our economy. I say let them fail and let the smaller, more responsible companies replace them. Survival of the fittest.

    • csmb12 says:

      I agree that the government shouldn’t be making a habit of bailing companies out. If you fail to run your company then you should pay the price. I would say, however, that just allowing companies such as AIG to fail would have a huge impact on both the national and global economy. We can see how much the global economy is connected by the situation in Greece and the rest of southern Europe. I’m normally against the government sticking its nose in the business sector, but I think this time it was necessary.

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