Too Big to Fail - $7,000,000,000,000

The bailout of Citi is the latest attempt to prevent the economy from collapsing. Citi will be loaned $20b, not because it has a great business plan, but because it's too-big-to-fail.

And now an analysis on Bloomberg.com makes the assertion that the Citi bailout is a tiny number in comparison with the total amount the US is throwing at the economy. It appears that the total government commitment exceeds $7 trillion. I actually don't know what that number looks like, but I think it's this: $7,000,000,000,000.

According to the Bureau of Economic Analysis, our GDP is $14,429.2 billion. So the equivalent of half our GDP has been pumped back into the economy in the form of loans, bad-debt buy-backs and loan guarantees. To a large extent, all this government action seems to be occurring because certain companies are too-big-to-fail.

Assuming that certain companies are truly too big to fail, are there other companies, possibly in other industries that are also too big to fail? Right now the bailout is focussed on financial companies and other companies - like GM, Ford and Chrysler - that rely on consumer purchasing to survive. But there must be companies elsewhere in the economy that are too big to fail. What happens if GE falters? Or Google? Or Microsoft? Have we discovered - at the point of an economic gun - that we should not allow companies to grow too large?