Too Big to Fail: Some Questions for the House Financial Services Committee

James Gattuso /

Rep. Jeb Hensarling (R-TX) (James Berglie/ZUMAPRESS/Newscom)

Rep. Jeb Hensarling (R-TX) (James Berglie/ZUMAPRESS/Newscom)

Tomorrow, the House Finance Committee, chaired by Representative Jeb Hensarling (R–TX), is holding a hearing on one of the most damaging legacies of the 2008 financial crisis: the “too big to fail” doctrine.

Simply put, the doctrine holds that some firms are so essential to the functioning of the U.S. financial system—and their sudden failure so disruptive to the economy—that policymakers must keep them from failing, bailing them out if necessary.

Four witnesses are scheduled to discuss the issue tomorrow: Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corporation (FDIC); Richard Fisher, president of the Federal Reserve Bank of Dallas; Jeffrey Lacker, president of the Federal Reserve Bank of Richmond; and Sheila Bair, formerly chair of the FDIC. There are a number of key questions that Members should ask during this hearing:

Too-big-to-fail is perhaps the most important—and most vexing—problem facing financial regulators today. There are no easy answers, but the cost to taxpayers and the financial marketplace is simply too high to ignore. Tomorrow’s hearing provides an opportunity for policymakers to sort out the facts and alternatives, and begin to take the first steps toward a real solution.