{"id":9403,"date":"2010-03-18T11:32:42","date_gmt":"2010-03-18T16:32:42","guid":{"rendered":"http:\/\/law.marquette.edu\/facultyblog\/?p=9403"},"modified":"2010-03-18T11:32:42","modified_gmt":"2010-03-18T16:32:42","slug":"the-business-of-bigness","status":"publish","type":"post","link":"https:\/\/law.marquette.edu\/facultyblog\/2010\/03\/the-business-of-bigness\/","title":{"rendered":"The Business of Bigness"},"content":{"rendered":"

\"brandeis\"<\/a>Last summer, Eric Dash of the New York Times<\/em> wrote an excellent article<\/a> on the problems associated with big business in the U.S.\u00a0 Dash noted that almost 100 years ago, Supreme Court Justice Louis Brandeis wrote prophetically about the \u201ccurse of bigness.\u201d\u00a0 Justice Brandeis denounced generally the influence that big business had on U.S. politics and its economy.<\/p>\n

Today, Brandies\u2019s \u201ccurse of bigness\u201d is incorporated into the less pejorative term for large U.S. companies \u2014 companies that are \u201ctoo big to fail.\u201d \u00a0Certainly in light of the recent U.S. financial crisis, people are well aware of the influence that these large U.S. companies have on U.S. politics and its economy.\u00a0 \u00a0But these \u201ctoo big to fail\u201d companies may also be creating moral hazards in business operations, and the U.S. has yet to establish a unified system for dealing with the business of bigness.\u00a0 <\/p>\n

Amidst the recent financial crisis, deeming companies \u201ctoo big to fail\u201d legitimized the government\u2019s bailouts of large U.S. companies facing financial ruin.\u00a0 \u00a0The U.S. feared that the failure of a \u201ctoo big to fail\u201d company would not only affect the company and its immediate stakeholders, but such a failure could also bring down the country\u2019s broader economic system. \u00a0Accordingly, companies invoked the \u201ctoo big to fail\u201d exception to financial demise, imploring the government to save a company to avoid far-reaching adverse affects on the U.S. economy if the company should be allowed to fail.\u00a0 In less than five years, the U.S. Department of Treasury has committed almost $590 billion<\/a> to bailing out 833 companies.\u00a0 To date, less than a third of that money has been returned.<\/p>\n

The \u201ccurse of bigness\u201d is also present in the context of corporate compliance monitoring of large U.S. businesses.\u00a0 At Marquette Law School\u2019s recent Hallows Lecture, former U.S. Deputy Attorney General Mark R. Filip cautioned against aggressive monitoring of U.S. corporations.\u00a0 Filip noted that an indictment of a company is essentially the death knell for that company.\u00a0 In his discussion, Filip pointed to the example of the prosecution of Arthur Andersen, which at one time was one of the \u201cBig Five\u201d accounting firms.\u00a0 Despite a guilty verdict that was ultimately overturned by the Supreme Court, Arthur Andersen had lost its business reputation and has never returned as a viable business.\u00a0\u00a0 Filip noted that 28,000 employees in the U.S. lost their jobs ultimately because Arthur Andersen was simply indicted, but never found guilty of any wrongdoing.\u00a0<\/p>\n

So how should the United States deal with these large companies that constitute U.S. \u201cbigness\u201d? \u00a0Should we be inclined to bail them out when they face financial collapse? \u00a0And do we likewise hesitate to prosecute them for potential wrongdoings in order to avoid another Arthur Andersen?\u00a0 Given that the demise of such large companies \u2014 even as result of a mere indictment \u2014 potentially has significant adverse effects on jobs and the U.S. economy, \u00a0the sensible approach may be to bail out certain companies and to proceed with caution when investigating those same companies for non-compliance.<\/p>\n

But if the U.S. takes such a position, it may also create moral hazards in business operations.\u00a0 Many commentators have recognized that these mega-companies may be more inclined to make risky business decisions knowing that the government is willing to bail out the companies to avoid the effect of companies\u2019 collapse on the broader U.S. economy.\u00a0 Likewise, companies may be less\u00a0willing to toe the line of legality in their business operations knowing that the government would hesitate in indicting them for any potential wrongdoings.<\/p>\n

Not surprisingly, some believe that if a company is \u201ctoo big to fail,\u201d then it is \u201ctoo big to exist.\u201d\u00a0 In fact, Senator Bernie Sanders of Vermont introduced the \u201cToo Big to Fail, Too Big to Exist Act of\u00a02009<\/a>.\u201d \u00a0Briefly, the bill seeks to have the Secretary of Treasury identify the \u201ctoo big to fail\u201d companies and break up those entities.<\/p>\n

Yet that approach seems like a knee-jerk reaction to a crisis situation, if not fundamentally against an economic system that encourages economic growth.\u00a0 Undoubtedly, outside the financial crisis, large businesses have benefited the U.S. economy.<\/p>\n

Other more conservative approaches<\/a> view the \u201ctoo big to fail\u201d companies as a secondary problem.\u00a0 Rather, the problem is that the U.S. has failed to establish a uniform system for monitoring and restructuring the large U.S. businesses if they should face collapse. \u00a0\u00a0<\/p>\n

Yet, at least with respect to increased monitoring, such an approach may lead to undesirable results similar to the Arthur Andersen result.\u00a0 And if Congress allocates money to increased monitoring, there would most likely be increased pressure for results in the form of cases brought and indictments \u2014 the exact result that former U.S. Deputy Attorney General Mark R. Filip cautioned against.<\/p>\n

China\u2019s approach<\/a> is simply to refuse to recognize companies as \u201ctoo big to fail.\u201d\u00a0 Yet that approach seems overly simplistic, and may in fact lead the broader U.S. economy into financial collapse.<\/p>\n

Certainly, the \u201ccurse of bigness\u201d still presents significant problems to the United State almost 100 years after Justice Brandeis coined the term.\u00a0 And perhaps the greatest dilemma is finding a cure that is not worse than the curse.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last summer, Eric Dash of the New York Times wrote an excellent article on the problems associated with big business in the U.S.\u00a0 Dash noted that almost 100 years ago, Supreme Court Justice Louis Brandeis wrote prophetically about the \u201ccurse of bigness.\u201d\u00a0 Justice Brandeis denounced generally the influence that big business had on U.S. politics […]<\/p>\n","protected":false},"author":78,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ocean_post_layout":"","ocean_both_sidebars_style":"","ocean_both_sidebars_content_width":0,"ocean_both_sidebars_sidebars_width":0,"ocean_sidebar":"","ocean_second_sidebar":"","ocean_disable_margins":"enable","ocean_add_body_class":"","ocean_shortcode_before_top_bar":"","ocean_shortcode_after_top_bar":"","ocean_shortcode_before_header":"","ocean_shortcode_after_header":"","ocean_has_shortcode":"","ocean_shortcode_after_title":"","ocean_shortcode_before_footer_widgets":"","ocean_shortcode_after_footer_widgets":"","ocean_shortcode_before_footer_bottom":"","ocean_shortcode_after_footer_bottom":"","ocean_display_top_bar":"default","ocean_display_header":"default","ocean_header_style":"","ocean_center_header_left_menu":"","ocean_custom_header_template":"","ocean_custom_logo":0,"ocean_custom_retina_logo":0,"ocean_custom_logo_max_width":0,"ocean_custom_logo_tablet_max_width":0,"ocean_custom_logo_mobile_max_width":0,"ocean_custom_logo_max_height":0,"ocean_custom_logo_tablet_max_height":0,"ocean_custom_logo_mobile_max_height":0,"ocean_header_custom_menu":"","ocean_menu_typo_font_family":"","ocean_menu_typo_font_subset":"","ocean_menu_typo_font_size":0,"ocean_menu_typo_font_size_tablet":0,"ocean_menu_typo_font_size_mobile":0,"ocean_menu_typo_font_size_unit":"px","ocean_menu_typo_font_weight":"","ocean_menu_typo_font_weight_tablet":"","ocean_menu_typo_font_weight_mobile":"","ocean_menu_typo_transform":"","ocean_menu_typo_transform_tablet":"","ocean_menu_typo_transform_mobile":"","ocean_menu_typo_line_height":0,"ocean_menu_typo_line_height_tablet":0,"ocean_menu_typo_line_height_mobile":0,"ocean_menu_typo_line_height_unit":"","ocean_menu_typo_spacing":0,"ocean_menu_typo_spacing_tablet":0,"ocean_menu_typo_spacing_mobile":0,"ocean_menu_typo_spacing_unit":"","ocean_menu_link_color":"","ocean_menu_link_color_hover":"","ocean_menu_link_color_active":"","ocean_menu_link_background":"","ocean_menu_link_hover_background":"","ocean_menu_link_active_background":"","ocean_menu_social_links_bg":"","ocean_menu_social_hover_links_bg":"","ocean_menu_social_links_color":"","ocean_menu_social_hover_links_color":"","ocean_disable_title":"default","ocean_disable_heading":"default","ocean_post_title":"","ocean_post_subheading":"","ocean_post_title_style":"","ocean_post_title_background_color":"","ocean_post_title_background":0,"ocean_post_title_bg_image_position":"","ocean_post_title_bg_image_attachment":"","ocean_post_title_bg_image_repeat":"","ocean_post_title_bg_image_size":"","ocean_post_title_height":0,"ocean_post_title_bg_overlay":0.5,"ocean_post_title_bg_overlay_color":"","ocean_disable_breadcrumbs":"default","ocean_breadcrumbs_color":"","ocean_breadcrumbs_separator_color":"","ocean_breadcrumbs_links_color":"","ocean_breadcrumbs_links_hover_color":"","ocean_display_footer_widgets":"default","ocean_display_footer_bottom":"default","ocean_custom_footer_template":"","ocean_post_oembed":"","ocean_post_self_hosted_media":"","ocean_post_video_embed":"","ocean_link_format":"","ocean_link_format_target":"self","ocean_quote_format":"","ocean_quote_format_link":"post","ocean_gallery_link_images":"on","ocean_gallery_id":[],"footnotes":""},"categories":[70,41],"tags":[],"class_list":["post-9403","post","type-post","status-publish","format-standard","hentry","category-business-regulation","category-business-transactional-law-and-practice","entry"],"_links":{"self":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/9403","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/users\/78"}],"replies":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/comments?post=9403"}],"version-history":[{"count":0,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/9403\/revisions"}],"wp:attachment":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/media?parent=9403"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/categories?post=9403"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/tags?post=9403"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}