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Abstract

The belief that some banks are too big to fail became reality during the financial crisis of 2007–2009 when the biggest banks in the United States were bailed out. Since then, big banks have grown much bigger and have become increasingly complex. This development has led to far greater attention on the need to resolve the too-big-to fail-problem. This paper examines the way in which the Federal Deposit Insurance Corporation has resolved troubled banks over time and throughout the various regions of the nation. The paper also examines post-crisis regulatory reform by focusing on the new orderly liquidation authority the Dodd-Frank Act provides to the FDIC to serve as the receiver for big banks whose failure poses a significant risk to the country’s financial stability. We assess whether this process will indeed eliminate the too-big-to-fail problem.

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