I saw another reference to "Too Big To Fail" in a local blog (link here) which of course goaded me into another tirade. Maybe the blog author will post my long-winded comment. In the event that he doesn't, I thought I'd do a small dump here.
The big issue with "Too Big To Fail" is that it is a sound-byte solution to the wrong problem. The issue isn't the size of a company, the issue is a lack of effective risk management and regulation. What many people don't know is that the Securities and Exchange Commission basically outsources financial services industry regulation to the industry itself. The concept is that of the "Self Regulatory Organization", which is a fancy way of saying "fox guarding the chicken coup".
Of course politicians love "Too Big To Fail" because it sounds good. Who isn't against those "big bad insurance companies/banks/etc."? However admitting that there have been decades of ineffective regulation is not exactly a win for Washington DC politicians, especially those who are well entrenched.
Don't buy the fallacy of "Too Big To Fail".