An Action Plan for Economic Recovery

by Roger Thompson, for the Alumni Bulletin, at Harvard Business School, December 2009.

Most books about the nation’s financial crisis tell us what happened. In his new book, HBS senior lecturer Robert Pozen tells us how to fix the system. A financial industry veteran and chairman of MFS Investment Management, a Boston firm that oversees more than $170 billion in pension and mutual funds, Pozen writes with authority and unusual clarity about complex issues in Too Big to Save? How to Fix the U.S. Financial System (Wiley).

How does the government figure out which financial institutions are too big to fail?

There are two valid reasons for bailing out a financial institution. First is to protect the system for processing payments, like checks, because that system is critical to the operation of the U.S. economy. Second is to avoid a situation where the failure of one large, interconnected financial institution is likely to lead to the failure of many other large institutions…(continue reading)

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