Too Big To Fail Reform Vote Delayed

Regulators delayed Monday their vote on how to resolve the "too big to fail" problem, saying they needed at least another week to discuss their plan, Reuters reports.

At the beginning of the month, Federal Reserve chairman Ben Bernanke told the Financial Crisis Inquiry Commission that the resolution of the "too big to fail" problem was "the most important lesson of this crisis."

The Dodd-Frank financial reform, passed in July, gives regulators "resolution authority" to deal with this issue, but certain details of that authority need to be clarified. On Monday, the Financial Stability Oversight Council, a new agency created under the July legislation, told the Federal Deposit Insurance Corporation that it needed more time to draft the rule.

With its new "resolution" authority, the FDIC has the ability to seize large, "systemically important" financial institutions if they are in danger of failing. The FDIC would then chip off pieces of the institutions and eventually put those pieces up for sale. Earlier this month, HuffPost's Shahien Nasiripour reported that the country's four biggest lenders -- Bank of America, JPMorgan Chase, Citigroup and Wells Fargo -- collectively hold roughly $7.5 trillion in assets, equivalent to more than half of the estimated output of the U.S. economy last year.

The FDIC said the seizure and liquidation process, if the government should need to implement it, would resemble bankruptcy proceedings, with senior creditors getting precedence over shareholders, Reuters says. The Financial Stability Oversight Council will meet for the first time on Friday, to discuss the details. If all goes according to plan, the rule will take effect during the start of next year.

Comments

[Duppy]

08:18 PM on 09/29/2010

I say let them all fail. I am working on moving every dime I have in large banks to small banks.

[DismayedRepub]

03:10 PM on 09/29/2010

This would have a devastating effect on the shareholders of any institution were the government to take over one of them. It makes me think twice about investing at all in the financial industry. This poorly crafted law doesn’t even address the real issue; it’s not that these guys are too big to fail; the real issue is that they owed money to the Chinese. In the summer of 2007 the Chinese held $340B in Fannie & Freddie bonds. These bonds were in default and they wanted their money. That is why we bailed them out.

[Tiggy]

08:24 AM on 09/29/2010

As a small business owner, I am sick of being held hostage by them. They get a next to zero interest rate and make it impossible to for us to qualify and those that do...get a whopping 13% interest rate.
So those of us trying to clean up the mess created by these TBTF have our hands tied! And no, that new legislation does little to help us start up manufacturing jobs! We tried to obtain a loan to manufacture shirts in the US made from Cotton grown in US and textiled in the US and to create jobs could not! That is our government trying to create jobs for you. Give it to the banks and hope for the best...we all know how that's working out.

[Mekales]

09:32 PM on 09/28/2010

Between the delay of this vote and the Repubes voting against the taxes on companies that move jobs OUT of the Country.... yep, we should bounce right back from this economic nightmare - NOT!

[rmreddicks]

07:57 PM on 09/28/2010

Something like the below would be a start.

http://news.yahoo.com/s/ap/20100928/ap_on_re_eu/eu_iceland_banking_crisis

[floodmfx]

07:27 PM on 09/28/2010

The regulators? You mean the new agency headed by Geithner and Bernanke -
yeah, I trust them to do the right thing -
they are the voice of the average suffering American against the greed of Wall St -
Come on -

Why even waste our time with this non-sense -

[wallingtonlives]

12:22 PM on 09/28/2010

The economy will not recover until people outside the beltway are confident their money
will not be funneled into the hands of the oligarchy of the TBTF CEO's. There are many ways
this is happening.

The big banks continue to get bigger, with no regulations to stop their growth.

"Bank Reform" has accomplished nothing and will not change the growth and derivative speculation that helped to create the Great Recession (i.e. Great Rip Off of 08).

Business as usual over at Jamie Dimon's place.....

[swtexas]

10:20 AM on 09/28/2010

Well, I'm not surprised. The number one thing they need to do will go being ignored- BUST UP THE DAMN OLIGOPOLIES!!!!!!!!!!!!

[Mekales]

09:33 PM on 09/28/2010

Agreed!