The ability of regulators to seize and unwind a failing large company — the very heart of the Dodd-Frank Act — is caught in a crossfire.
It's the mega financial companies on one side, Republican lawmakers and academics on the other.
Stuck in the middle? The Federal Deposit Insurance Corp.
The agency's staff is working on a policy statement or perhaps even a regulation that would provide both sides with more detail about how systemically important financial companies would be resolved under Orderly Liquidation Authority.
Title II of the 2010 reform law extended the FDIC's liquidation authority to any mega financial firm. In other words, what failing banks have been subject to for decades — the Friday-night seizure that ends careers and wipes out shareholders followed by a sale or a shutdown — will now apply to any financial company deemed systemically important.
Whatever policy statement or rulemaking the FDIC staff settles on would need to be approved by the agency's board and put to public comment before it could be adopted. That could take a year, but the staff aims to get something before its board by yearend.
For the full piece see "FDIC Walks Fine Line with Mega-Bank Liquidation Plan" (may require registration or subscription).