Our founding fathers designed the constitution to avoid any one branch, agency or state becoming "too big to fail".
Why not businesses?
Please consider this: Rather than spending BILLIONS and trampling the constitution in an attempt to legislatively and bureaucratically avoid damage from institutions that are "too big to fail"… TAX’EM!
Seriously…. We all know "economy of scale" works great up to the point. But as the entity grows, institutional complexity increasingly consumes resources and obscures objectives. Eventually, "waste, fraud and abuse" become the major product of the super large institution.
We need to avoid future AIGs and GMs… Do this by discouraging the growth of overly complex institutions. Rather than OUTLAW "too big to fail" institutions, levy an exponential "size" tax, justified by the costs associated with regulating (and cleaning up behind) the type of overgrown companies that led to this recession.
Idea: When the net worth of a corporation exceeds X (negotiate the trigger there in Congress) start applying a sliding-scale tax severe enough to force the company to consider reorganization into multiple smaller companies based on geography, product lines, or whatever makes sense. The result: better organized, smaller companies, with greater transparency and purpose, and much easier to manage (internally) and regulate (at state or federal level).
Use anti-monopoly laws as the basis for defining the necessary separation between entities sufficient to define when an entity has successfully split and no longer subject to the tax. As "free traders", this may sound off-the-wall to many of us, but consider the alternative the anti-"free traders" will come up with!
Keep government out of our companies by making sure our companies split themselves before they become so large as to threaten economic stability or monopolistic behavior. The best way to do this is to simply encourage companies to subdivide on their own to improve their own economic condition. The current market mania with "largeness" is part of what has led us into this economic crisis. The answer is NOT more and more complex regulation, but rather, self-interest in not becoming too large, encouraged through a "too big to fail tax".
Use taxes as an "economic stick" to encourage more competition and discourage growth beyond what is manageable via the markets themselves and relatively simple laws and regulatory agencies. The Democrats will love it because they will be able to sell it as a tax on the "super big corporations"; Republicans will love it because it uses competition and free enterprise to keep businesses scaled down to a more manageable and transparent size; populists will love it because it promotes a greater emphasis on small businesses and competition; the stock market will love it because it makes the value of corporations more transparent to investors.
Please consider this answer to "too big to fail" and pass it on to your Senators and Representative!