One of the main objectives of the Dodd-Frank Wall Street Reform and Consumer Protection Act is to once and for all eliminate the Too Big to Fail doctrine that has permeated our Financial Services Industry going back to at least the 1980s failure of Continental Illinois National Bank (where public funds were used to save the bank).
Too big to fail is based on the premise that if the failure of a financial institution would adversely affect the financial services industry because of the size of the institution or its “interconnectness” with other institutions in our economy, it should not be allowed to fail. This usually results in the use of public (i.e., taxpayer provided) funds to save the institution which is anathema to most members of Congress and, in their view, should not be permitted.
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