By Peter J. Wallison
The reason the administration doesn’t “trumpet” Dodd-Frank’s elimination of too-big-to-fail is simple: the act doesn’t do that.
In answer to Alan Blinder’s “Why Trump, the ‘King of Debt,’ Hates Dodd-Frank” (op-ed, June 7): The reason the administration doesn’t “trumpet” Dodd-Frank’s elimination of too big to fail is simple—the act doesn’t do that. Not even close. Title II of the act, contrary to Prof. Blinder’s account, doesn’t apply to banks at all, but only to nonbank financial firms. Banks are specifically excluded from the title and left to resolution by the FDIC. The FDIC doesn’t have the resources, financial or otherwise, to keep open a failing trillion-dollar bank and of course cannot sell it to a healthy trillion-dollar bank—the agency’s usual tack—without making the TBTF problem worse. So the only recourse under Dodd-Frank is a taxpayer bailout. It’s important to read the statute, and a good reason—as House Financial Services Committee Chairman Jeb Hensarling has just proposed—to open Dodd-Frank and start over.
