Too Big To Fail


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.


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.

  1. Systemically Important Financial ...

    Any firm as designated by the U.S. Federal Reserve, whose collapse ...
  2. Supervisory Capital Assessment ...

    A financial stress test conducted by the Federal Reserve System ...
  3. Counterparty Risk

    The risk to each party of a contract that the counterparty will ...
  4. Moral Hazard

    The risk that a party to a transaction has not entered into the ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Bailout

    A situation in which a business, individual or government offers ...
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