Bankruptcy: A Better Answer to “Too Big to Fail”

David C. John / December 10, 2009

The financial reform bill that is currently before the House would give regulators virtually unlimited power over “too big to fail” financial institutions. Those are large, complex and usually international entities whose failure could cause such a shock to the interconnected financial system that others would be endangered. Under the House bill, if one of them does get into trouble, the FDIC would step in to reorganize and run the financial institution until it could be closed or sold. The FDIC has done an acceptable job closing small and medium banks, but does not have the expertise necessary to deal with such complex companies. (more…)