Scott Alvarez, the Federal Reserve Board's general counsel, told lawmakers that the Fed is unlikely to issue clear standards on when it would use Dodd-Frank to take apart big banks that pose a "grave threat" to the economy, each situation would have its own circumstances.

"It's very difficult to have a uniform rule," Alvarez stated.

"As debate in Congress and elsewhere grows about whether stronger methods are needed to limit systemic risks from financial giants, the 'grave threat' authority is a less-discussed element of Dodd-Frank compared with other measures in the law," writes American Banker's Joe Adler.

Under Section 121 of the Dodd-Frank reform law, the provision authorizes the Fed to take certain actions against a large financial institution if the regulator considers it to be a "grave threat."

"A condition of 121 is that we take a variety of steps short of requiring breakup before we're allowed to even consider breaking up the firm," Alvarez told the House Financial Services oversight subcommittee.

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