Applaud The Wall Street Journal for, alone among most papers, reporting on the congressional testimony yesterday on the “too big to fail” problem.

The paper gives it good play, too, though its just a short wire story (I’ll take what I can get!), putting it on A2 with the headline:

Economists Seek Breakup of Big Banks

And the lede:

Instead of funneling taxpayer money into big financial firms, the government should take the radical step of breaking them up into smaller, more transparent companies, top economists told lawmakers Tuesday.

Those top economists are Nobelist Joseph Stiglitz and MIT’s Simon Johnson, formerly of the IMF. Stiglitz said:

“We have little to lose, and much to gain, by breaking up these behemoths, which are not just too big to fail, but also too big to save and too big to manage”

Right. If you’re too big to fail, you’re too big to exist. That’s my mantra. The press has not done a good job—and was abysmal before the crash—covering this simple issue. The Journal reports that Stiglitz testified that too-big-to-fail leviathans distort markets. That means if there’s an implied government backstop to the banks’ downside, they’re going to take more risks on the upside. Double down, so to speak.

That puts taxpayers in a Catch-22: Let them fail and hope for the best or bail them out and hope they don’t do it again a few years down the road (they will. It’s inevitable).

The Journal reports that Johnson said this:

Massachusetts Institute of Technology Prof. Simon Johnson argued that policy makers need to overhaul antitrust laws to prevent the development of financial firms that are too large. Banks should be sold to new private-equity owners and broken up, Mr. Johnson said, adding that banks could be divided regionally or by type of business to avoid a concentration of power.

The WSJ quotes the Kansas City Fed chief Thomas Hoenig, who essentially said we should just let these giants fail. That worked out well with Lehman Brothers, didn’t it?

Bloomberg’s story whiffs by leading with Hoenig (whose testimony really wasn’t all that newsworthy, since he’d recently said much the same stuff) and burying Stiglitz and Johnson—and then not even getting to their testimony about breaking up too-large institutions. Boo.

A guiding principle of journalism is that we ought to be very skeptical of concentrations of power. Let’s hope this issue takes off in the press.

UPDATE: I just saw another Bloomberg story on “too big to fail,” though this one is a report on a separate meeting with FDIC Chairwoman Sheila Bair. So they gave the concept some coverage:

U.S. lawmakers considered and some backed an idea by Federal Deposit Insurance Corp. Chairman Sheila Bair to limit the size of banks and prevent lenders from becoming “too big to fail,” U.S. House Democrats said.

Representative Brad Sherman of California and member of the House Financial Service Committee, said Bair “threw out” as a possibility regulating the growth of companies to prevent any from becoming so big that government is forced to take over the institution.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.