Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street Highlight

That is the crux of the too-big-to-fail problem. The failure of giant financial institutions that are so big and have built up so many obligations to one another could cause a domino effect that could take down other major players and eventually the entire financial system. If the government had not stepped in to save AIG, major banks in the United States and Europe would have potentially suffered tens of billions of dollars of losses at a time when neither they nor the system could withstand such a further shock. The government felt it had no choice, and perhaps that was correct, but as long as there are financial institutions of such size and with so many interconnections, future massive crises—and bailouts—are all but inevitable.