too-big-to-fail

A policy that may be followed by governmental regulators, which says that a bank or business is so big that its failure would have a catastrophic effect on the country or the global economy. For example, in the 1970s in the United States, the government bailed out Chrysler Corporation; in the 1980s, it bailed out Continental Illinois, a Chicago-based bank. In 1998, a hedge fund, Long-Term Capital Management, which had made bad investment decisions, was on the verge of collapse when it was saved by a group of banks led by the New York Federal Reserve.