A forum on how the government could wind down failing institutions in a future crisis does not exactly make for levity.
But the daylong meeting Tuesday of the Federal Deposit Insurance Corp.'s advisory committee on its new resolution powers — with an impressive list of participants led by former Federal Reserve Chairman Paul Volcker — did produce its share of one-liners.
The agency's authority granted by the Dodd-Frank Act to resolve "systemically important financial institutions" is touted by its fans as the answer to the chaos that defined the Lehman Brothers bankruptcy.
But the new facility is still very much in the development phase, and it is hard to imagine how it will work until the first time it is used. Volcker appeared to say as much when asked for his thoughts toward the end of the morning session. "I'm aware we are approaching 10:30," he said, sparking laughter. "That's the only thing I'm really certain about."
Later, Volcker remarked about the importance of the "living will" — a firm's own pre-drawn resolution plan meant to help the government in a resolution. "I'm at an age where I worry about living wills," he said.
In the event's second session, which focused on an FDIC study about how Lehman would have been resolved using the Dodd-Frank authority, Michael Bradfield, the FDIC's former general counsel, cited air travel weather delays in illustrating the importance of regulators being prepared for crises.
"What you want to avoid is how the airlines handle summer thunderstorms," Bradfield said. "They know there are thunderstorms coming, but they don't do a damn thing about it preparing the staff and the systems that are needed to deal with the traffic flow that's delayed."
To which Arthur Murton, the FDIC's director of insurance and research, responded, "Are you saying we should designate the airlines as SIFIs?"
Bradfield quipped: "I think that would be a big contribution."
