Clearing House War-Games Failure of Megabank

Print
Email
Reprints
Comment (1)
Twitter
LinkedIn
Facebook
Google+

WASHINGTON — For the first time, the death of a financial giant has been war-gamed.

While the results are still being sorted out, the simulation of a $2 trillion-asset bank's failure showed the orderly liquidation authority in Title II of the Dodd-Frank Act went pretty smoothly.

"Title II works," says Paul Saltzman, the president of The Clearing House Association, which sponsored the simulation. "We are digesting it now and will meet with regulators to share our lessons learned."

The data could help convince skeptics that the Dodd-Frank Act did indeed end Too Big to Fail.

Critics of the reform law have been arguing that bankruptcy is a better option and are even championing a revised Chapter 14. They suspect federal regulators will simply continue to bail out big banks and stick taxpayers with the tab.

But that narrative ignores the cold hard facts of the law, not to mention all the work the Federal Deposit Insurance Corp. has put into building the Orderly Liquidation Authority infrastructure.

The Clearing House spent the past 10 months preparing the simulation, which took place Nov. 8-9 at the Doral Arrowwood in Rye Brook., N.Y., as part of a larger symposium.

The association organized 180 people to play various roles in the simulation of $2 trillion-asset institution's demise. Some people played the executives who ran the failing bank while others were executives at two competing firms. The simulation also included people filling the roles of regulators, investors, politicians and even journalists who got to throw some sand in the gears by reporting false rumors.

The Clearing House drew its cast from member banks and the ranks of former regulators as well as lawyers from seven different firms and professionals from Ernst & Young and Promontory Financial.

JOIN THE DISCUSSION

(1) Comment

SEE MORE IN

RELATED TAGS

'We Don't Want to Wage this Proxy Contest in the Gutter': Week's Best Quotes

The most notable quotes from American Banker stories of the previous week. Readers are encouraged to add their own observations in the Comments fields at the bottom of each slide.

(Image: Fotolia)

Comments (1)
Reminds me of little boys of call of duty. When you are shot, you simply hit the reset button and play again. No harm. No file. Its just a game using monopoly money......
Posted by FreemenFreemarkets | Thursday, December 20 2012 at 7:48AM ET
Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

  LinkedIn

Women in Banking — American Banker: American Banker invites women executives across the banking and financial services industry to connect with one another, share news and best practices, and keep up with our Mentor Factor and Most Powerful Women in Banking initiatives.

Join our mailing list »

Our weekly eNewsletter contains timely and relevant news about women in banking across the web. Sign up for this must-read digest today.

Already a subscriber? Log in here
Please note you must now log in with your email address and password.