A Federal Reserve official said in a speech Friday that a modified bankruptcy regime might need to be created to deal with the failure of a very large financial firm.
Saying there is no firm “too big to fail,” Federal Reserve Bank of St. Louis President James Bullard added that “the correct phrase is ‘too big to fail quickly.’ ” His comments came as part of an address that laid out his proposals for building an oversight and safety-net system that would save the financial system from the sorts of shocks it has seen over the last year or so.
Like other officials, Bullard argued that as officials move forward, they’ll need to develop a “credible resolution regime for large financial institutions and to upgrade monitoring” of those institutions.
Bullard said the aim of policymakers should be to create “an orderly resolution regime that will close down the failed firm without creating problems for the remaining firms in the industry.” In the case of a large systemically important institution, Bullard suggested that one “simple reform would be to rewrite the bankruptcy code to allow for special considerations that apply to financial firms.” Dow Jones Newswires
