# Too big to fail

`kaal:entity:too-big-to-fail`

**Status.** derived

This node is assembled mechanically from the 6 claims that carry the concept tag `too-big-to-fail`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

6 claims across 5 works, 2010 to 2012.

**2010**

- [1558614-037](https://wulfkaal.github.io/claims/1558614-037) [failure/argued] *(failure mode)* -- The Dodd-Frank Act is notable for what it omits: it does not break up the largest banks, does little to help smaller and regional banks compete, and because compliance is burdensome and expensive may actually have raised the barrier to entry into financial services.
  > It does little to help smaller and regional banks compete with the big banks. Because complying with regulation is burdensome and expensive, the Act may have raised the barrier for entry into the financial services industry.
  Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614

**2011**

- [1908473-014](https://wulfkaal.github.io/claims/1908473-014) [failure/argued] *(failure mode)* -- The incentive effects of corporate governance controls may not operate in systemically important financial institutions, because managers and owners who anticipate a bailout commitment adjust their risk preferences upward.
  > the incentives originating from corporate governance controls may not work in SIFIs. SIFIs are often considered too big to fail and may be bailed out.108 If that is the case, SIFI principals-managers-owners may anticipate a bailout commitment and adjust their risk preferences upwards.
  Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473

**2012**

- [1998455-017](https://wulfkaal.github.io/claims/1998455-017) [failure/argued] *(failure mode)* -- Contingent capital rules could contribute to overriding the moral reasoning of decision makers, in which case contingent capital would actually increase, not reduce, risk incentives for institutions that are too big to fail.
  > This could mean that contingent capital rules could actually contribute to overriding decision maker's moral reasoning. In that case, contingent capital could actually increase risk incentives for SI- FIs that are too big to fail.
  Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
- [1998455-018](https://wulfkaal.github.io/claims/1998455-018) [failure/argued] *(failure mode)* -- Regular corporate governance controls may not work in systemically important financial institutions, because those institutions are considered too big to fail and their leaders, anticipating a bailout commitment, are incentivized to shift their risk preferences upwards.
  > the regular corporate governance controls may not work in SIFIs. SIFIs are often considered too big to fail and may be bailed out. If that is the case, SIFI leaders may anticipate a bail-out com- mitment and may be incentivized to shift their risk preferences upwards.
  Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455
- [2061166-010](https://wulfkaal.github.io/claims/2061166-010) [mechanism/argued] *(failure mode)* -- Reliance on public bail-outs, unaccompanied by any threat that management, shareholders and creditors would share significant losses, created an asymmetric incentive for excessive risk taking by financial institutions.
  > The reliance on a public bail-out without the threat of any significant losses shared by management, shareholders and creditors may have created an asymmetric incentive for excessive risk taking by financial institutions.
  Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012). SSRN: https://ssrn.com/abstract=2061166
- [2097160-020](https://wulfkaal.github.io/claims/2097160-020) [failure/argued] *(failure mode)* -- Ordinary SIFI creditors have suboptimal incentives to monitor management because they implicitly expect that the government will provide bailout funding given the nature of the entity.
  > Because of an implicit expectation that the government will provide bailout funding due to the nature of the entity, ordinary SIFI creditors may have suboptimal incentives to monitor the performance of management.177
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/too-big-to-fail.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.