The count now stands at 2 Chairs of Federal Reserve Branches to go on record stating that 'Too Big to Fail' is at worst a sham and at best a disastrous policy. Last time, it was from Dallas, this time KC:
In a 1999 speech on financial megamergers, I concluded that “To the extent these institutions become ‘too big to fail,’ and … uninsured depositors and other creditors are protected by implicit government guarantees, the consequences can be quite serious. Indeed, the result may be a less stable and a less efficient financial system.”That was only included for the 'I told you so' aspect, but here is what I found to be incredibly prescient:
More than a decade later, the only thing I can change about this statement is that the government guarantees are no longer just implicit. Actions during the financial crisis have made this protection quite explicit.
History tells us that for a country to succeed and endure economically it must adhere to a simple set of principles. No matter the market’s complexity, these principles anchor both its financial system and overall economy. And the most fundamental of these principles is a commitment to maintaining the integrity of the institutions within the system. This commitment provides a culture of sound business ethics, a confidence in the rule of law, the reliability of contracts, and a culture of fair play on a level field.The emboldened statement should be words to live by. It seemingly applies to nearly all fields and is part of an argument that I have brewing in various stages of outline/draft form.
If we stray from our core principles of fairness or ignore the rule of law, we distort the playing field and inevitably cultivate a crisis. When the markets are no longer competitive, firms become a monopoly or an oligopoly and it matters more who you know than what you know. Then, the economy loses its ability to innovate and succeed. When the market perceives an unfair advantage of some over others, the very foundation of the economic system is compromised.
Regarding the laws of unintended consequences and why I despise projection pseudo-science...
I'm not afraid of toll roads. As I've stated before, if any form of transportation needs to pay for itself, like for realz, in both theoretical and practical terms, it is that of individual mechanized automobility and the necessary infrastructure to support it. The issue was that public dollars were overextended in either building or maintaining the public infrastructure of a suburb/arterial/highway world and that if it were only built and maintained by private capital and investment all would be right with the world.
Well, it turns out, like always, it is never that simple and the real issue is the simple weight of all that concrete. San Diego toll road goes bust:
On average, nearly 22,600 cars travel the road each day, far below initial projections of 60,000. Riders typically marvel at the seemingly empty stretches of pavement, even during peak traffic hours.2
“The idea was to see if the private sector could succeed in building highways,” said Marlon Boarnet, a professor of planning policy and design at the University of California Irvine. “But one thing that history is teaching us is that it is more complicated that we thought.”3
But once the higher tolls kicked in, they stopped completely. Monk and others said many rush-hour commuters now cut through residential neighborhoods to avoid paying the higher tolls.The real issue here is that this like unfortunately all transportation systems, it is being thought of as a profit-based industry in a bubble, disconnected from all 'externalities.' However, as we know, transportation can't be disassociated from that which it is inextricably linked, development.
Hulsizer does not believe last year’s toll hike was unwise. He cited company data showing only a slight decrease in traffic and an uptick in revenue following the increase. The company also noted that it has made improvements to its toll machines in an attempt to address drivers’ complaints.
The real purpose for tolls is to tone down traffic and encourage more location efficient housing and real estate and more efficient, safer, and cleaner forms of transportation. While it may turn a profit in early or middle stages, at some point, the failure of toll roads is built-in to the very system itself.
Which is why, in the end, tolls and road building (and transportation, in general) is best left to public entities that are enabled to take the 'loss' of transportation startup/operation/maintenance costs, which can divert revenue to more necessary/"profitable" public expenditures. If invested wisely would see return in the form of high quality private development, tax base, meaning reduced overall tax burden on citizens long-term, and a more livable city.