{
  "id": "R45162",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R45162",
  "active": true,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 584350,
      "date": "2018-04-12",
      "retrieved": "2018-08-29T15:38:03.261859",
      "title": "Regulatory Reform 10 Years After the Financial Crisis: Systemic Risk Regulation of Non-Bank Financial Institutions",
      "summary": "When large, interconnected financial institutions become distressed, policymakers have historically faced a choice between (1) a taxpayer-funded bailout, and (2) the destabilization of the financial system\u2014a dilemma that commentators have labeled the \u201ctoo-big-to-fail\u201d (TBTF) problem. The 2007-2009 financial crisis highlighted the significance of the TBTF problem. During the crisis, a number of large financial institutions experienced severe distress, and the federal government committed hundreds of billions of dollars in an effort to rescue the financial system. According to some commentators, the crisis underscored the inadequacy of existing prudential regulation of large financial institutions, and of the bankruptcy system for resolving the failure of such institutions.\nIn response to the crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010. Titles I and II of Dodd-Frank are specifically directed at minimizing the systemic risk created by TBTF financial institutions. In order to minimize the risks that large financial institutions will fail, Title I of Dodd-Frank establishes an enhanced prudential regulatory regime for certain large bank holding companies and non-bank financial companies. In order to \u201cresolve\u201d (i.e., reorganize or liquidate) systemically important financial institutions, Title II establishes a new resolution regime available for such institutions outside of the Bankruptcy Code.\nThe Title I regime applies to (1) all bank holding companies with total consolidated assets of $50 billion or more, and (2) any non-bank financial companies that the Financial Stability Oversight Council (FSOC) designates as systemically important. To date, FSOC has designated four non-bank financial companies for enhanced supervision: AIG, GE Capital, Prudential, and MetLife. However, FSOC has rescinded its designations of AIG and GE Capital as a result of changes to those companies, and MetLife successfully challenged its designation in federal court, leaving Prudential as the sole remaining designee as of the publication of this report. \nLegislation that would repeal FSOC\u2019s authority to designate non-banks for enhanced supervision has passed the House of Representatives (H.R. 10), and a bill that would alter FSOC\u2019s designation process and standards in more limited ways has also been introduced in the House (H.R. 4061). \nTitle II of Dodd-Frank creates an \u201cOrderly Liquidation Authority\u201d (OLA) pursuant to which the Federal Deposit Insurance Corporation (FDIC) can serve as the receiver for failing financial companies that pose a significant risk to the financial stability of the United States. The OLA, which was developed as an alternative to the Bankruptcy Code, is similar to the mechanisms the FDIC uses to resolve failed commercial banks. The OLA grants the FDIC broad powers to manage the liquidation or sale of a failed financial company, and Title II includes provisions that offer financial institutions more robust protections against \u201cruns\u201d by their derivatives counterparties than they would have under the Bankruptcy Code. The FDIC, Federal Reserve, and Office of the Comptroller of the Currency have promulgated a number of rules that have important consequences for the OLA concerning the FDIC\u2019s powers as receiver, its general strategy for resolving failed institutions, \u201closs-absorbing capacity\u201d requirements for certain bank holding companies, and derivatives contracts. \nThere have also been a number of proposals to reform Title II. A bill that would (among other things) repeal Title II passed the House in June 2017, and bills to amend the Bankruptcy Code to allow it to deal more effectively with the failure of large financial institutions have been introduced in the House and the Senate (H.R. 10 (115th Cong.), H.R. 1667 (115th Cong.), S. 1840 (114th Cong.)).",
      "type": "CRS Report",
      "typeId": "REPORTS",
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      "topics": [
        {
          "source": "IBCList",
          "id": 4803,
          "name": "Financial Stability"
        }
      ]
    }
  ],
  "topics": [
    "Economic Policy",
    "Foreign Affairs"
  ]
}