Democrats and Republicans ripped into Treasury Secretary Timothy Geithner during a Congressional hearing Thursday, as Geithner defended an administration plan to address "too big to fail" financial firms.
Legislators argued that the plan institutionalized "too big to fail" by requiring perpetual government assistance -- bailouts -- for failed firms deemed to be systemically important; that the plan's fund -- to be used in the event of a firm's failure -- should be prepaid by these firms, as opposed to being paid after the fact by the survivors; and that the proposal specified that a list of designated firms would be kept secret, which was neither realistic nor helpful.
Federal bank regulators echoed that last point.
FDIC Chairman Sheila Bair said it's not "realistic to try to keep this confidential." Comptroller of the Currency John Dugan added that "it's going to be hard not to disclose...who they are."
"Through some combination of mandatory disclosures to shareholders and financial analysts [figuring it out]...it is likely most, if not all, would eventually be known to the public," said Federal Reserve Governor Daniel Tarullo. "We should be realistic here about what will or will not be known."
A quick scan of the bill's language, though, shows that this isn't necessarily the case. But at the very least the language contributed to -- if not caused -- the confusion.
On page 12 of the bill, which was released Tuesday, the new body created to watch over systemically important firms "is authorized to issue formal recommendations, publicly or privately, that a Federal financial regulatory agency adopt heightened prudential standards for firms it regulates to mitigate systemic risk."
In short, the proposed council can publicly declare that regulators should apply tougher standards to these firms, thereby outing them as "too big to fail."
But later, on page 17, the bill specifies that the new council and the Federal Reserve "may not publicly release a list of companies identified" as systemically important.
"There was this confusion today," House Financial Services Committee Chairman Barney Frank (D-Mass.) said in an interview with the Huffington Post. "It does look complicated."
To that end, Frank said he's changing the bill, calling for the council to publicly recommend which firms will need tougher oversight by regulators. The effect will be that the public will know who is "too big to fail."
Not that most wouldn't be able to figure it out, though.
"If we polled the markets to find out which 20 institutions they believe are too big to fail, I am confident that there would be near-perfect agreement and that the list would very largely overlap that of the regulators," writes Douglas Elliott, a former investment banker and currently a fellow in economic studies at the Brookings Institution, a think tank.