This week we found out that the federal government will impose some compensation restrictions on companies that are “too big to fail.” The White House “Compensation Czar” Kenneth Feinberg will impose steep pay cuts on bailed-out companies. Specifically, the seven companies that got “exceptional assistance” from the federal government — there was a $700 billion bailout package — will be whacked. The new rules will require that salaries of the 25 highest-paid executives be slashed by 90 percent.

The companies in question are American International Group, Citigroup, Bank of America Corp., General Motors, GMAC, Chrysler and Chrysler Financial.

One of the unresolved questions is how some companies were designated as “too big to fail” and others weren’t. We don’t know the answer.

However, I assume that after the restrictions are imposed on executive wages and bonuses, these banks will still be too big to fail.

Once upon a time, the United States was dominated by huge monopolies and trusts that controlled many sectors of the U.S. economy. They were so big that their activities and policies were seen as a threat to the United States. In order to reduce those threats, the President of the United States took them on, broke them up and ushered in a long era of more competition in the marketplace.

That president was, of course, Teddy Roosevelt, the original trustbuster.

It makes sense to me. If AIG or Citigroup had been 10 or 15 smaller banks or insurance companies, the failure of any one of these would have simply been a run-of-the-mill business failure, which happens every year.

There would not have been a “systemic risk” to the entire U.S. economy.

I guess at some point we determined — I don’t know who decided this, but I’ll bet it was an economist — that big is actually good. Therefore, insurance companies, banks, auto companies and other corporations that are ginormous are now apparently OK. Maybe the rule is that they only pose a risk to the economic stability of the United States when they go in the tank.

This raises the question of whether controlling the outrageous compensations of employees of these behemoths will diminish the risks these giants pose to the stability of the U.S. economy; indeed, the world economy. My sense is that the problem is not just enormous compensation and rewarding high-risk behavior. It seems to me that the very size of these companies is a danger.

When they fail and pose alarming risks, what should we do about them?

President Barack Obama is apparently not planning to emulate Teddy Roosevelt. There is no sign that there is a “trust-busting” plan in the current administration. Nor is there a discussion in the news media of breaking up these virtual monopolies.

In fact, in the aftermath of the dangerous economic meltdown in the United States, the concentration in the banking industry has actually increased. As smaller banks fold, the U.S. government is marrying them to the behemoths that are now alive thanks to massive taxpayer financial transfusions.

This is a disturbing development at best.

Unless big is really better. Or it’s raw political power, influence and money in politics.

In an era of massive globalization and rapid concentration of corporations, it may well be that these giant corporations are in fact replacing governments as the centers of power. If that’s the case, then government becomes mostly an efficient delivery mechanism for shooting public funds into the veins of troubled private firms.

So now where do we go as a nation?

That raises the question of what other institutions might be too big to fail at the national or even state level. Can a university be “too big to fail” and bring down an entire state with it? Can a newspaper be too big to fail; oil companies?

I found an article that said “Dutch Steel Co. and International Steel Co. announced on Oct. 25, 2004, would create the world’s largest steel producer, with 165,000 employees, operations in 14 countries, and the capacity to produce 70 million metric tons annually. This merger is done to cut down the competition level and increase the production capacity.”

Yikes! Now I am getting really nervous. This sounds “too big” to me. Clearly the big banking crisis of 2008-2009 also “… cut down the competition level.”

It turns out that in America there is such a thing as “too big to fail,” and we, the taxpayers, will be the enablers of their survival with our hard-earned bucks.

©2009 Steffen Schmidt is a Proffessor of Political Science at Iowa State University

Reprinted with permission from syndication @ www.insideriowa.com, Iowa’s Internet Magazine