Senator Bob Corker Intends to Bring Sobriety, Accountability Back to the Banking Industry

THIS FROM SENATOR BOB CORKER THIS MORNING: NO BANK OR HOLDING COMPANY SHOULD BE TOO BIG, TOO IMPORTANT TO FAIL

BOTTOM LINE: LIVE AND LET LIVE, FAIL AND LET DIE

At a banking hearing in July, I asked FDIC Chairman Sheila Bair if having a resolution mechanism in place to deal with the problems with some of our ‘too-big-to-fail’ financial institutions would have reduced the risk to our financial system. She said absolutely – it would have created better market discipline across the system and reduced market uncertainty about who would be next, who would win, and who would lose.

The FDIC has the authority to wind down a failing bank, but not a failing bank holding company, which has exacerbated the moral hazard problem we’ve seen over the past 18 months. It’s important that we take our time with regulatory reform, but in the interim we need the ability to resolve bank holding companies in an orderly way.

Fellow Banking Committee member Mark Warner, D-Va., and I introduced The Resolution Reform Act of 2009, S. 1540, legislation giving the FDIC authority to resolve bank holding companies, in an effort to fill this glaring regulatory gap. This expanded authority would put a bank holding company into the hands of the FDIC if the bank (insured depository institution) within the holding company structure needs to be resolved. The bank holding company would be moved into receivership, the pieces would be sold off, and the company would no longer exist.

I think it’s important to create this mechanism and provide clarity so that as we approach broader regulatory reform, we don’t have the moral hazard of a ‘too big to fail’ mentality.
For more information on S.1540, you can visit my Web site at: corker.senate.gov/public/index.cfm