Ending Too Big to Fail: The FDIC & Financial Reform


Associated Program:
John F. Kennedy Jr. Forum
Sheila Bair
Mossavar-Rahmani Center for Business and Government

Former FDIC head Sheila Bair, who presided over the FDIC during the height of the financial crisis, argues that the recently passed Dodd-Frank Act will reduce the risk of systemic failure in the financial markets by improving federal oversight and preventing banks from taking excessive risks.One major factor that Bair cites as a cause of the financial meltdown was the doctrine of “too big to fail”—that policymakers would be obligated to bail out large financial institutions facing bankruptcy, which provided an implicit safety net that encouraged them to take on dangerous amounts of risk.“In world of ‘too big to fail’, risk-taking is subsidized by the government.