The big banks were too big to fail from "summary" of The Big Short by Michael Lewis
The big banks were so enormous and interconnected that if one failed, it could bring down the entire financial system with it. This created a paradox where these institutions were considered both too big to fail and too big to be allowed to exist. The big banks had become so intertwined with the global economy that their collapse would have catastrophic repercussions worldwide. This realization led to a belief that the government would step in to bail them out in times of crisis, as their failure would be too disastrous to contemplate. The concept of being too big to fail also created a moral hazard, as it allowed these institutions to take excessive risks without fear of the consequences. Knowing that they would be ...
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