“Too Big to fail” was first known at a 1984 congressional hearing in which Congressman Stewart McKinney discussed federal intervention Deposit Insurance Corporation with Continental IIIinois. The idea is that some financial institutions are so large that if any of them fail, it will bring an unexpected disastrous effect to the economy. As we all know, the 2008 financial crisis raised the issue of “too big to fail” to its most controversial point. Banks, insurance companies, car manufacturers are part of the large corporate sector. They make money by creating and selling complicated derivatives and trading loans, commodities and stocks. When the large economic environment is prosperous, large companies gain a competitive advantage and try to convince some small businesses to become larger. If their investments fail, their customers and even taxpayers will be forced to run the risk of global economic collapse. Kimberly Amadeo describes an example of how the “too big to fail” problem applies to American International Group (AIG) which is one of the largest insurance companies in the world. Amadeo recalls: “Most of his business was in traditional insurance products. When she entered the world of credit default swaps, she got into trouble. These swaps insured the assets that backed corporate debt and mortgages. AIG was too big to fail because, if AIG had failed, it would have triggered the failure of many of the financial institutions that purchased these swaps.” (Amadeo) AIG was eventually saved by a two-year $85 billion loan from the Federal Reserve. This prevented AIG from putting further pressure on the financial sector. “In exchange, the government received 79.9% of the capital of AIG, the right to replace management and… middle of paper… financial institutions, regardless of their intended purpose. Otherwise the AIG problem will arise again. Works Cited1) Amadeo, K. (n.d.). Too big to fail. Retrieved from http://useconomy.about.com/od/businesses/p/Too-Big-to-Fail.htm2) Puzzanghera, J. (2013, September 17). Many banks considered too big to fail are even bigger. Los Angeles Times. Network. 01 March 20143) Dudley, WC (7 November 2013). End too big to fail. Federal Reserve Bank of New York. Network. 01 March 20144) Dodd Frank Act. (n.d.). US Commodity Futures Trading Commission. Web March 1, 2014 Retrieved from http://www.cftc.gov/lawregulation/doddfrankact/index.htm5) Bordelon, B. (2013, July 23). Wall Street's Dodd-frank Law Still Criticized Three Years Later Retrieved from http://dailycaller.com/2013/07/23/dodd-frank-wall-street-law-still-criticized-tre-anni-later/