“Too big to fail” is the term coined for banks and lenders that are so vital to the U.S. economy that the government cannot allow them to collapse.

The bailout last week of Freddie Mac and Fannie Mae, the country’s two biggest mortgage finance companies, is one example. The U.S. Treasury Department seized control, placed them in federal conservatorship and committed loans and guarantees backed by taxpayer money to prevent their failure. The takeover follows the government rescue of Bear Stearns, the huge Wall Street investment bank which was sold to JP Morgan Chase in a deal backed by the Federal Reserve.

Both actions are controversial because they have potentially put taxpayers on the hook for billions of dollars to aid largely privately controlled enterprises that made huge mistakes by making bad loans and investments.

Another “too big to fail” drama on a much smaller scale is developing right here in Rhode Island.

It involves Twin River, the financially troubled slots parlor in Lincoln that has missed a payment to its lender and has now been given an extension of time to renegotiate its debt to stay out of bankruptcy court.

The issue is important to Rhode Islanders because state leaders are counting on Twin River to contribute $254 million to the state budget this fiscal year.

The payments help hold together a spending plan that is already coming apart. The state ended last year with a $33.6-million deficit. The budget this fiscal year is unraveling as projected cost savings are not being realized. And the budget for the year that starts July 1 is already forecast to have a $83-million shortfall.

The recession in Rhode Island could make it all much worse.

While state leaders weigh the financial mess, secret negotiations have been going on since March between Twin River and its bankers, resulting in the deal Friday to extend the current arrangement, called a forbearance agreement, until Jan. 31. Another set of secret meetings has been held at the State House between Twin River’s representatives and state administrators to review the deal between the state and the slots parlor. Taxpayers have generally been kept in the dark, but sooner or later, they’ll find out what has been going on.

Here are the facts that are known.

The owners of Twin River borrowed $577 million to buy, renovate and run what used to be the old Lincoln Park dog track and four racing tracks in Colorado. Twin River’s revenue, after it meets expenses and other financial obligations, doesn’t cover the debt.

When Twin River’s owner, UTGR Inc., a subsidiary of BLB Investors LLC, missed a loan payment in March to its chief lender, Merrill Lynch Capital Corp., alarm bells went off on Wall Street. Standard & Poor’s Corp. reported that the missed payment could lead to bankruptcy.

A Twin River spokesman explained that the company spent more on construction than anticipated, and described its financial crisis as “dire.”

Since then, Twin River’s owners have been trying to redo their business plan. They have laid off workers, closed some restaurants and persuaded state leaders to allow the gambling hall to offer virtual blackjack, a players-rewards program and 24-hour gambling on weekends and holidays.

Still, there is apparently not enough revenue to meet its financial obligations.

Some options for Twin River include restructuring the ownership by bringing in a new equity partner or selling the enterprise.

But to balance its books, Twin River still has to either raise revenues or cut expenses.

The facility could seek state permission to offer even more gambling opportunities to boost its revenue. This is the “casino creep” that gambling opponents have decried for years. If that happens, can a full-fledged destination casino with table games, a hotel and entertainment complex be far behind?

Twin River also could renegotiate its deal with the state. Currently, the slot parlor pays the state 61.45 percent of the revenue left in the machines after payouts, yielding a projected $254 million this fiscal year. In June, Twin River proposed reducing the state’s share to 25 percent in return for a one-time, up-front payment to the state of $500 million.

Any change that reduces Twin River’s payments will be viewed by many as a bailout.

Other factors make any solution even more complicated.

Massachusetts is moving toward legalized gambling. A proposal by Governor Patrick to license three casinos, including one in Southeastern Massachusetts, was beaten back by the state legislature last year. But momentum is building again this year.

Meanwhile, the Mashpee Wampanoags are pushing for a separate deal with Massachusetts for a casino while pursuing federal permission to open a gambling hall in Middleboro, about 30 miles from Lincoln.

Any casino in Massachusetts would siphon off gamblers, especially from the Boston area, and reduce Twin River’s revenue, putting its financial position in deeper peril.

If Twin River is not able to reach agreement with its lenders, it could be pushed into federal bankruptcy or a type of state receivership that would put the courts in charge of deciding who gets how much, including the taxpayers, the lenders and a string of contractors who still have not been paid for the renovation work.

Then there’s the overall gambling environment. Twin River’s take, with the addition of the new games, promotions and longer hours of operation has so far held up pretty well in the economic slowdown. The slot parlor continues to make its payments to the state and remains in full operation.

Other New England casinos report that their revenues have slumped. If the recession here deepens, how much it could cost Twin River, and ultimately the taxpayers, is hard to calculate.

If “too big to fail” becomes a local policy debate about Twin River, it’s only because state leaders allowed the gambling emporium to grow.

Remember, Governor Carcieri, House Speaker William Murphy and Senate President Joseph Montalbano affirmed the sale of Lincoln Park to the new owners and management team and let them expand gambling here. They built the gambling revenue into the budget.

They tied Rhode Island and Twin River together, to float or to sink.