Fact and Fiction Behind Too Big to Fail

Dodd-Frank’s “Resolution Authority”: Not Too Little. Just Too Late.

TBTF bank CEOs were quick to support the Dodd-Frank “resolution authority”, stating that banks should be allowed to fail. This was a game. Dodd-Frank clarified and strengthened the ability of the government to bail out failing banks.

When systemic banks fail, the whole system goes down, as we saw in 2008.

If the intent is to prevent further government bailouts, wouldn’t the best tactics be focused on minimizing the creation of systemic risk? Resolution authority only deals with resolving failed banks — after they have failed. It does nothing to reduce systemic risk. TBTF bank CEOs can continue to take excessive risks and earn their high compensation amounts, knowing that while they may be removed after their institutions have collapsed, the government will be able to bail out those institution with stronger legal authority. Taxpayers still are left holding the bag.

Not too little, but certainly too late.

Fairy Tale Capitalism: Fact and Fiction Behind Too Big to Fail

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Was the mortgage debacle the sole cause of the financial bubble's collapse? Do you believe those who say the elimination of Glass-Steagall barriers didn't contribute to its building? Fairy Tale Capitalism: Fact and Fiction Behind Too Big To Fail places the mortgage mess into a broader perspective. It explains how the Federal deposit guarantee was married to investment banking's trading intensity, why the Fed had no choice but to bail out the biggest banks and how derivatives played a poorly-understood, but equally important role in the crisis. In simple terms Emily Eisenlohr walks with those who live on Main Street down Wall Street's darker alleys.

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