The "too big to fail" principle persisted during the savings-and-loan crisis of the late eighties and early nineties, when Washington saved uninsured lenders to big banks wherever it saw a risk to the broader system, letting uninsured lenders to smaller banks languish. In the summer of 1991, Fed chairman Alan Greenspan — just a few years after saying (as a libertarian private-sector economist at the time) that he wasn't even "a great fan of deposit insurance" — reminded lawmakers of the post-Continental stance that “there may be some banks, at some particular times, whose collapse and liquidation would be excessively disruptive.”
Gradually, lenders to big banks understood that their money was no longer at risk. And the banks realized that the bigger and more complicated they got, the safer they would be from market discipline — and so they became. Of course, the financial industry changed in response to many other forces, too, including shifting market demand, global competition, and increasing investment in the stock market. But we'll never know exactly how great a role government protection played in driving finance’s transformation, since government subsidies—and that’s what "too big to fail" amounts to—always distort the valuable information that markets provide.
Nearly a decade and a half after the government rescued Continental Illinois, "too big to fail" expanded beyond commercial banks to other parts of the financial world. The catalyst: the 1998 collapse of a small Connecticut hedge fund, Long-Term Capital Management. Long-Term, a money manager for wealthy investors, used exotic, often unregulated, financial instruments called derivatives to bet on the up-and-down movement of certain securities and financial markets. In the summer of 1998, after four years of good profits, the firm miscalculated badly. Like Continental, it had exercised its American right to take risks — and it screwed up.
It couldn't afford to. Long-Term had made $125 billion in investments, even though its own shareholders had given it only $2.3 billion. It had borrowed the rest—$53 for every dollar it had in hand. But that wasn't all: through its derivatives, Long-Term magnified its potential obligations to a scarcely conceivable $1.25 trillion. There would be no way for the hedge fund to pay its debts should anything go wrong, and now it had.
"Too big to fail" played a key role in bringing the crisis about. The source of Long-Term's breathtaking borrowing was none other than the big banks, both commercial and investment. Lenders to the commercial banks had known that the government implicitly protected them, and thus didn't worry much about what the banks were doing with their money, including extending so much credit to the hedge fund. The investment banks had to keep up with the commercial banks as competition intensified and their profit margins shrank, so they had poured their money into Long-Term, too.
Please go and read the entire article - it is very informative, and really explains this "Too Big to Fail" stuff, where it came from, and its ramifications.
Now, we consider Obama to hand Commerce Dept. authority over cybersecurity ID, by Declan McCullagh, January 7, 2011:
STANFORD, Calif.--President Obama is planning to hand the U.S. Commerce Department authority over a forthcoming cybersecurity effort to create an Internet ID for Americans, a White House official said here today.
It's "the absolute perfect spot in the U.S. government" to centralize efforts toward creating an "identity ecosystem" for the Internet, White House Cybersecurity Coordinator Howard Schmidt said.
That news, first reported by CNET, effectively pushes the department to the forefront of the issue, beating out other potential candidates, including the National Security Agency and the Department of Homeland Security. The move also is likely to please privacy and civil-liberties groups that have raised concerns in the past over the dual roles of police and intelligence agencies.
It doesn't matter who is in charge of it. A signature on a paper can now summon the information via national security letters, no warrant necessary, and the victim doesn't get told. Another signature can reorganize it, and place it under the NSA, the Federal Reserve, or Hillary Clinton. The only say we have in the matter is whether we vote for "change".
The Obama administration is currently drafting what it's calling the National Strategy for Trusted Identities in Cyberspace, which Locke said will be released by the president in the next few months. (An early version was publicly released last summer.)
"We are not talking about a national ID card," Locke said at the Stanford event. "We are not talking about a government-controlled system. What we are talking about is enhancing online security and privacy, and reducing and perhaps even eliminating the need to memorize a dozen passwords, through creation and use of more trusted digital identities."
They are making this sacrifice for us!
Schmidt stressed today that anonymity and pseudonymity will remain possible on the Internet. "I don't have to get a credential, if I don't want to," he said. There's no chance that "a centralized database will emerge," and "we need the private sector to lead the implementation of this," he said.
When Social Security came out, people were told not to divulge their Social Security Number to anyone other than a duly-identified agent of the Social Security Administration.
Now look at where that is.
Here's where this is headed...
What they are doing is making sure they can identify who is saying what on the Internet - the final frontier of free speech, where people all over the world can compare notes on how their government is screwing them.
By being able to identify people on the Internet, they can see who is looking into their illicit dealings - because they can order law enforcement to leave their dirty-dealing alone, and the corporate media won't rat out the rats that the media's owners have placed in government... but free people, especially armed people free to talk about politics, there's a problem!
And you're not going to have any choice in the matter.
Because, a few companies are going to get so big, that no matter how bad they screw up, the government will bail them out and give them no-bid contracts, while the little guys get squeezed out by oppressive tax, labor and environmental laws, and are allowed to flounder for just plain dumb moves that they make.
A big-business-and-big-government-mafia will emerge; this will be far, far worse than it was under the Soviets, under the Nazis, or under anyone else we can imagine; this system is evolving very quickly right before our eyes.
The whole system is getting too intrusive, too over-reaching....
We have to shut it down - while there is still time.
If you want a vision of the future, imagine a boot stomping on a human face - forever.
-- George Orwell