The term “too big to fail” was first popularized by Congressman Stewart McKinney in A.D. 1984 during a congressional hearing over whether the FDIC should be allowed in intervene in the Continental Illinois bank problem. But the term didn’t really enter the American lexicon until A.D. 2008 when a number of American banks and financial institutions were threatened with bankruptcy and the government justified supporting those institutions with billions of taxpayer-dollars because those institutions were deemed “too big to fail”.
According to Wikipedia,
“The ‘too big to fail’ theory asserts that certain financial institutions that are so large and so interconnected that their failure would be disastrous to the economy, and that they therefore must be supported by government when they face difficulty.”
It’s interesting to note that “too big to fail” (“TBTF”) is a theory. The principle underlying the TBTF label (that some institutions are so important that they must be supported at any cost) is largely untested, unproven and therefore merely theoretical.