The Living Wills Are Out

The most underdiscussed action of the Obama administration thus far is the creation, via the Dodd-Frank bill, of a mechanism that’s supposed to allow for the orderly unwinding of large insolvent financial institutions without the need for a taxpayer bailout. When the bill was being debated, you heard a lot about this. Both on the right and on the left, people alleged that the scheme was unworkable or unrealistic, but the bill’s authors, the White House, and the Treasury Department all insisted they were wrong. Yet ever since the law passed, people have tended to sort of breezily ignore its existence, still talking about “too big to fail” banks as if the Dodd-Frank framework doesn’t exist.

And yet here today on the Federal Deposit Insurance Corp. website we have for the first time the “living wills” of the “systematically significant financial institutions” subject to special regulation by the law. These are the plans, legally required by Dodd-Frank, that are supposed to provide the guidance for unwinding these institutions in case something goes drastically wrong. I haven’t read any of them yet, but this is what people concerned about too big to fail should be looking at. Are these sound plans or aren’t they? Will this work? I’ll be looking at the texts and also at secondary analysis to try to keep everyone informed about the state of play.