Obama’s handing of the financial crisis is on the block once again, and everybody is throwing tomatoes. All sides have lashed out against his “too big to fail” approach according to Reuters, in an interesting twist for the president who is pulling the economic and financial strings of what the future of the American free market economy actually looks like.

Too Big To Fail!

The Obama administration based its bail out strategy on the idea that some banks and Wall Street firms are too big to fail and that their demise would mean catastrophe for the American and world economy. They did let Lehman Brothers file for bankruptcy in mid September of 2008, no Federal funds there. That same week, they bailed out several other firms and have since pumped billions into the financial market to keep a certain group of companies afloat. Some have paid back their loans, others have not. Controversy over how much money the folks working at those firms that received federal money should make continues to percolate.

Now, Obama’s most recent penny into the well to deal with the woes of the financial industry are getting legislators’ wallets all aflutter.

"The bill we're considering today would merely institutionalize 'too big to fail'," said Republican Representative Jeb Hensarling, referring to a perception that financial giants could count on government bailouts after the large-scale taxpayer help doled out in the last year.

House Rep. Brad Sherman (D) said that Obama’s plan would enable, “permanent, unlimited bailout authority,” meaning, “unprecedented powers for the executive to decide spending and taxes, without congressional approval; and, depending on the desires of the executive branch from time to time, the greatest transfer of money from the Treasury to Wall Street in U.S. history."

The plan does seem to give the government a lot of discretion and power over the financial industry, essentially creating an FDIC pool of money that firms could borrow from when they get into trouble. My take on what financial firms will do with available money? Take the loan and place bets with it- it’s what they do. It’s both how they make money and how they got us into this mess last Fall.

But are we willing to let the firms live and die of their own accord? U.S. Secretary of the Treasury Tim Geithner defended the plan to Congress by saying:

"Without the ability for the government to step in and manage the failure of a large firm and contain the risk of the fire spreading, we will be consigned to repeat the experience of last fall. It's a really stark, simple thing.”

Essentially, he believes that we need to rule out what happened to Lehman Brothers. It’s financial firm welfare. I say fine- if that’s the case, then we need massive regulation- it’s like the healthcare plan: you take care of firms along the way with preventative medicine rather than treating cancer/ bankruptcy at the end of the road when the choice is either to be propped up or to fail and die.
The ripples of regulation will be as healthy as the ripples of failure could be.