Too Big To Fail

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DEFINITION of 'Too Big To Fail'

The idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure. "Too big to fail" describes the belief that if an enormous company fails, it will have a disastrous ripple effect throughout the economy.

INVESTOPEDIA EXPLAINS 'Too Big To Fail'

Large companies generally do business with many other companies for supplies and services. If a large company fails, the companies that rely on it for portions of their income might be brought down as well, not to mention the number jobs that would be eliminated. Therefore, if the cost of a bailout is less than the cost of the failure to the economy, a government may decide that a bailout is the most cost-effective solution.

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