Company Organization, Business Models, and the Crisis

Thomas H. Stanton

in Why Some Firms Thrive While Others Fail

Published in print July 2012 | ISBN: 9780199915996
Published online September 2012 | e-ISBN: 9780199950324 | DOI:
Company Organization, Business Models, and the Crisis

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Chapter 6 looks at effects of firms’ organization and business models on their behavior and vulnerabilities. Changes in law and advances in technology encouraged increasing consolidation of financial firms. Too many large complex financial institutions, besides being “too big to fail,” also became “too big to manage.” Firms such as Fannie Mae, Freddie Mac and large mortgage originators such as Countrywide built economies of scale but also vulnerabilities because of their inability or unwillingness to diversify before the crisis hit. As the former CEOs of Fannie Mae and Freddie Mac both told the Commission, the GSE can be hard if not impossible to manage, especially in a crisis.

Keywords: too big to fail; financial consolidation; Freddie Mac; Countrywide; business models; Fannie Mae; diversification

Chapter.  7438 words.  Illustrated.

Subjects: Financial Markets

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