Summary of Resolving Too-Big-to-Fail Banks in the United States

Mercatus Center,

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Resolving Too-Big-to-Fail Banks in the United States summary
“Too-big-to-fail” banks can still fail, but regulators’ ability to resolve them remains untested.


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This report from George Mason University’s Mercatus Center provides a detailed, articulate analysis of US large-bank regulation and its historical context. Economists James R. Barth and Apanard Prabha address the “too-big-to-fail” (TBTF) issue and its impact on federal agencies’ policies and practices. The report examines how regulators have handled this problem before and considers how TBTF might again rear its head in the future. The authors also evaluate how the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and other regulatory changes might help or hurt bank resolution. Because it presents a complex issue in language that a layperson can understand and from which an expert might gain new insight, getAbstract recommends this levelheaded analysis to regulators, policy makers, financial industry professionals and anyone with a bank account.

In this summary, you will learn

  • How the Federal Deposit Insurance Corporation (FDIC) has increased public confidence in the safety of bank deposits without eliminating the potential for bank failures
  • How banking crises have tested the FDIC’s ability to handle “too-big-to-fail” banks
  • How the FDIC’s authority to resolve large bank failures has changed under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010


Insuring Deposits
The economic history of the United States is replete with bank failures. During the Great Depression of the 1930s, massive withdrawals of deposits – known as “runs” – forced thousands of banks to close. In 1933, the US government created the Federal Deposit Insurance ...
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About the Authors

A senior finance fellow at the Milken Institute, James R. Barth is the Lowder Eminent Scholar of Finance at Auburn University. Apanard Prabha is an economist at the Milken Institute.

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