'Single Point of Entry': The Promise and Limits of the Latest Cure for Bailouts
11 Pages Posted: 31 Dec 2014 Last revised: 3 Mar 2015
Date Written: December 30, 2014
This essay explores proposed regulations meant to prevent a reoccurrence of the "Too Big to Fail" crisis of 2008. The new regulations, which are likely to go into effect in 2015, have two key features. First, a "Single Point of Entry" provision allowing regulators to more effectively and efficiently wind down failed financial institutions. Second, a heightened capital reserve provision meant to ensure that in the event of a large financial institution’s failure, losses can be absorbed entirely by private claimants without systemic consequences. The provisions are an important step in the right direction, but the ideal regulatory regime for preventing bailouts remains elusive.
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