An article in the New York Times states:
In the last year and a half, the largest financial institutions have only grown bigger, mainly as a result of government-brokered mergers. They now enjoy borrowing at significantly lower rates than their smaller competitors, a result of the bond markets’ implicit assumption that the giant banks are “too big to fail.”
a. Why are large banks able to borrow at lower rates than smaller banks?
b. Why does the bond market assume that these banks are too big to fail?
c. What are some of the possible consequences for the banking industry if the too-big-to-fail policy continues?