Fundamental Business Question

The concept of the United States government bailing out large companies and institutions brings up a fundamental business question that must be answered in today's society. This may be one of the most important issues that young business students pay attention to, since the government's involvement in our future careers will affect us for the rest of our lives. "Bailing out" can be defined as the government loaning struggling companies tax payer money in order to allow the companies to get back on their feet and recover from their financial hardships.

The large issue that is at hand, the one that we all must ask ourselves, is why should these businesses continue to operate when they were bound to go bankrupt and fail? The common response to this has been that these companies are "too big to fail." It is the belief of politicians, like President Obama, that these institutions have too many investments in them and play too large of a role in our economic markets, that if they did fail then our entire economy would dramatically decline. A subset of this idea is that these companies employ so many individuals that if they did fail, there would be too many people who would become unemployed as a result. So the government's response to this has been to lend these companies, like AIG, billions and billions of dollars. The administration believes that it is their place to step into the private sector. Their justification for these billions sent to the companies is that this is the better of the two options, however we must look at the ramifications that this decision has on the rest of the business world.

I believe that by the government bailing out failing businesses they are going against the mainstream American values that have made the United States the leading nation in the world. Throughout our history we have continually improved in all aspects of business. When one business could not succeed another would come along and do the job better. However, now this cannot occur due to the bailouts. We are no longer allowing the continual growth that occurs when businesses fail and successful businesses prosper. Instead, now we are stuck with the same businessmen and business concepts that got our economy in trouble in the first place. Peter Boockvar, equity strategist at the trading firm Miller Tabak and Co. also supports this viewpoint; he says that “Artificially trying to prop up dead entities is only prolonging the inevitable.” And the big question that should be drawn from this is why should these business men continue to receive multiple chances to get their business model right? That is not how the rest of the economy works. More importantly, this concept is not fair to these possible businesses that could be moving in and implementing their ideas.

Moreover, who is to say that a company is "too big to fail?" Enron was not bailed out and they were a huge corporation. The difference here was that they were entangled in corruption so the government did not want to help save them, regardless of how large they were and how big of a market share they held, even if this resulted in the loss of a Big 5 accounting firm. Based on this, we can see that in the end it is politics that determines which companies are saved and bailed out and which are left to the natural forces of the market.
Before the government acts again in bailing out another struggling consequence, they must first consider if they are actually helping and if maybe they should just let the free market work the way it is supposed to. What can be seen now though is that these businesses should not be bailed out even if in the eyes of some politicians they are “too big to fail.”

http://abcnews.go.com/Business/MarketTalk/story?id=5824413&page=1