FDIC Chairwoman Sheila Bair urged lawmakers to give her agency the power to regulate more troubled financial institutions as a way to cause less damage to the overall financial system.
"We need a new resolution regime for these large institutions, which does a better job of imposing loss on investors and creditors, instead of leaving it in the hands of government and the laps of the taxpayer. To be sure, creating such a resolution mechanism would be very bold. But recent history-I believe-has shown that it is a very necessary step,'' she said in a speech Economic Club of New York yesterday. "For 75 years the FDIC has quickly and effectively resolved failed banks. We are good at this. We have had a lot of practice over the years.
The subject of creating a systemic risk regulator is at the center of the current debate over the restructuring of the financial services system.
The Obama administration has called for a systemic risk regulator but hasn't said which agency should have those powers. House Financial Services Committee Chairman Barney Frank has said he favors giving those powers to the Federal Reserve while Senate Banking Committee Chairman Christopher Dodd wants the FDIC to have those powers.
She said that the concept of "too big to fail" should be "tossed into the dustbin."