Conclusions

After the experiences of Continental Illinois the idea that a bank could be too big to fail went out the window. This statement rings true because large banks did fail during this period and their shareholders lost their holdings. The government stepped in to prevent extreme spillover effects that could be caused by widespread depositor runs, but maybe more importantly a decrease in public confidence toward the banking system and its solvency.

The idea that large banks such as Continental were too bad to fail was proven to be bogus, but one did learn that during this period in time there were banks that were largest enough where in fact that they were too big to liquidate. It would have been almost logistically impossible to liquidate such a large bank; the uninsured depositors would be caught waiting for their funds during potentially long proceedings which would be incredibly disruptive to the banking system.