Government

Who's Too Big To Fail?

The Titanic
AP

Some companies are so big and interconnected that they could bring the whole financial system down if they collapsed.

Under the Dodd-Frank finance bill, these companies have to hold extra capital as a safety cushion against losses. They have to create "living wills" explaining how they'd be shut down if they were to fail. And they're subject to additional scrutiny from regulators.

This raises a simple question: Which companies should be subject to these rules?

Not surprisingly, there's a huge lobbying effort afoot as companies try to avoid being put on the list, the FT reports.

Any bank holding company with more than $50 billion in assets automatically makes the list. That includes more than 30 banks — not only the huge, national banks, but also big regional players. (Here's a list of the biggest U.S. banks.)

So the real question is: Which other companies will be deemed too big to fail (or "systemically important," to use regulators' preferred phrase)?

AIG is the poster child for this sort of list, and other large insurers are also candidates. Big hedge funds and asset managers may also make the list.

But the regulators themselves still can't agree. The Treasury and the Fed are imagining a list with "fewer than 10 names," according to the FT, while the FDIC wants to list dozens of companies.

The Fed, the Treasury and the FDIC may hash out their differences at a big meeting next month.

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