'Too big to fail' distorts capitalism

Columbia University Economics Professor Joseph Stiglitz does not obfuscate, not when it comes to free markets, the global financial crisis, or American capitalism.

Stiglitz said Friday on PBS's "Charlie Rose Show" that American capitalism contains a non-conforming component that policy makers need to address. Stiglitz said capitalism, and in particular American capitalism (corporate capitalism) requires both the potential for reward and the possibility of risk or failure. However, in the United States we have the doctrine of 'too big to fail' (or too interconnected to fail) which essentially means any bank, institution or entity whose failure would pose systemic risk, will be maintained or taken over by the United States government. But this doctrine blots-out the risk component of the risk / return in capitalism, he said. "This is not capitalism," Stiglitz said.