By John Bovenzi, Randall Guynn and Thomas Jackson
The “too-big-to-fail” problem took center stage in 2008 when it became clear that both the bankruptcy process and financial regulators were ill-prepared to handle the failure of systemically important financial institutions (SIFIs). The Dodd-Frank Act was passed three years ago to provide the regulators with new powers to solve this problem. Yet, there’s no agreement on the basic issue of whether the Dodd-Frank Act ended too-big-to-fail or institutionalized it.
Working as part of the Bipartisan Policy Center’s Financial Regulatory Reform Initiative we have studied this issue in detail and conclude that we are on the right path to ending too-big-to-fail and importantly doing so in a way that precludes government bailouts.
Alternatives are needed
The too-big-to-fail problem arises if the only choice policymakers have when a SIFI fails is between bailouts and collapse of the financial system. Policymakers need an alternative that allows aRead More »from Too Big to Fail: A Path Forward