Oct. 24 (Bloomberg) — The Obama administration says the Dodd-Frank financial reform law ends “too big to fail,” meaning that no financial institution will ever again need to be bailed out. The promise is alluring, but it’s already proving to be false.
The argument rests on the premise that bank capital is now high enough to withstand serious shocks, so a calamity is less likely. It also assumes that Dodd-Frank’s new resolution authority allows global financial institutions to be wound down in an orderly fashion, and that the law’s call for “living wills” ensures that banks provide all the necessary technical details regulators might need to take prompt pre-emptive action.
Copyright 2011 The National Memo