Policy Documents

Using Bankruptcy and Capital Standards to Address Financial Institutions That Are "Too Big to Fail"

David C. John –
November 24, 2009

The Obama Administration's proposal for financial regulatory reform is unrealistic and would give government regulators almost unlimited powers to take over or micromanage financial institutions. The better choice would be to amend U.S. bankruptcy law to create an open, expedited bankruptcy process in which an impartial court would oversee the restructuring or closure of large and complex financial firms. In addition, increasing financial institutions' capital requirements would reduce risk to the system and limit losses if a financial crisis occurs.