From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.


And I'm Michele Norris.

A year ago today, jubilant Democratic lawmakers including then-Senator Christopher Dodd and Congressman Barney Frank joined President Obama on stage to sign a new financial reform law.

President BARACK OBAMA: The American people will never again be asked to foot the bill for Wall Street's mistakes.

(Soundbite of applause)

Pres. OBAMA: There will be no more tax-funded bailouts, period.

NORRIS: The president said the Dodd-Frank Act would mean no firms are too big to fail, but many financial firms have consolidated and actually have gotten bigger since the crisis.

As NPR's Yuki Noguchi reports, it's not clear if the new law really means an end to government-funded bailouts.

YUKI NOGUCHI: This seems like a basic question: Is too big to fail dead? The administration's categorical answer is yes. They say under the new law, the government can oversee the dismantling of a failing firm, but it has no legal authority to do bailouts.

But some experts believe the truth is actually a little murkier.

Ms. SARAH ROSEN WARTELL (Executive Vice President, Center for American Progress): To the question of whether too big to fail is gone or not? The jury is still out.

NOGUCHI: Sarah Rosen Wartell is an executive vice president for the Center for American Progress and a former Clinton administration official. She says it's unclear because regulatory agencies are still hammering out details of how to implement the law. Wartell cites the so-called living wills provision as an example.

Regulators will require some large financial firms to file living wills or details about how their businesses operate. The theory is that, in the event of another crisis, this will would help the government wind down a failing business without disrupting the financial system.

Ms. WARTELL: And the real question is whether the regulators will have enough strength to look at some of those plans. And where they see that there's too much systemic risk there, that it's going to be too hard to unwind these institutions, will they force restructurings and divestitures of some of these institutions? Not clear yet. That's one of these places where there's a great deal of discretion left to the regulator.

NOGUCHI: Wartell says whether the living will works and whether too big to fail ends depends largely on how muscular regulators are. She says opponents are trying to weaken the rules by delaying implementation or by threatening to cut funding.

Ms. WARTELL: But I think we are better off than we were before the legislation - absolutely no doubt - and we have the promise of a more effective system.

NOGUCHI: Peter Wallison disagrees. Wallison is a senior fellow at the American Enterprise Institute. He was also a commissioner at the Financial Crisis Inquiry Commission who has, from the beginning, criticized the financial reform law.

Mr. PETER WALLISON (Senior Fellow, American Enterprise Institute): We have, in the Dodd-Frank Act, institutionalized too big to fail.

NOGUCHI: Wallison says by identifying large firms that need to file living wills, regulators are essentially saying: These are the companies that are too big to fail. He says investors will once again take that as a kind of implicit government guarantee.

Mr. WALLISON: And those companies will have major advantages over their smaller competitors. This is a serious, serious problem in my view.

NOGUCHI: Wallison says the large firms may benefit from their unofficial status as being too big to fail, but they will also have to comply with greater regulatory oversight. The effect, he says, is U.S. financial firms will lose ground to foreign competitors.

Wallison isn't saying this will lead to another taxpayer-financed bailout, but he doesn't see how it will prevent one either. The Dodd-Frank Act's intent is to give regulators a broader array of tools to monitor the financial system. When the next big shock comes, the government wants to be able to minimize the fallout.

The problem is it might take another crisis to see if the new system works.

Yuki Noguchi, NPR News, Washington.

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