"One thing that keeps coming up in comments, both here and on my column, is the widespread belief that all we need to do on the banking front is (a) break up the big banks, so that none of them are too big to fail (b) promise not to bail out any banks in the future. That way, the claim goes, bankers will know that they will face dire consequences if they misbehave, and market discipline will do the rest. Dream on."
—
Failure Is A Failed Strategy - Paul Krugman
Krugman does a great job in this post explaining why this idea I hear a lot of people express won’t work. Mainly because it was the way the world used to be and it was actually worse. That was a time when these financial crises occurred with much greater frequency.
Anyway, read his post.
