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May 10, 2012

FDIC’s Gruenberg’s Roadmap To End Too Big To Fail Puts Wall Street on Notice and Protects Taxpayers

Statement by Dennis Kelleher, president and CEO of Better Markets, on the speech delivered today by Acting FDIC Chairman Martin Gruenberg:

Acting FDIC Chairman Gruenberg spelled out how the FDIC will use its authority to ensure that too-big-to-fail financial firms that get into trouble will be liquidated, not saved by bailouts or the taxpayer.  Doing this is essential to prevent the few biggest banks from sticking their hands in the taxpayers’ pockets – again.  To really end bailouts requires the FDIC to have the ability and the will to shut them down without threatening the financial system.  Mr. Gruenberg is putting those banks on notice that the FDIC will do so.  

The Dodd-Frank financial reform law gives regulators the tools to ensure that there will be no more bailouts for the reckless behavior of the biggest financial firms.  The FDIC already has taken significant action to put these banks on notice that under its resolution authority it can take over and unwind a failing firm, wiping out equity holders, without disrupting the financial system or threatening the economy.

Chairman Gruenberg’s message from today should be clear: the markets should understand that there won’t be any bailouts next time.

The agency has been at the forefront on Dodd-Frank implementation, especially by requiring large banks to draw up their “living wills” in the event of a takeover. It has wisely used experts on its staff and the outside advisory committee to craft the technical details for ending too big to fail.  It is a model for careful and deliberate policymaking intent on protecting taxpayers.

The FDIC actions are critically important because the cost of the Wall Street created crisis continues:  10 million Americans still unemployed, millions more under-employed or discouraged from looking, millions more have lost their homes to foreclosure, and the average home prices across the country near the same level as they were in 2002.   The FDIC’s commitment to making sure that the American people never have to bear the costs of bailing out Wall Street again is welcome news to Main Street.

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