The perils of repealing FDIC resolution powers
By John Heltman
The Trump administration’s examination of Dodd-Frank Act powers to allow regulators to seize and unwind a failing megabank is drawing criticism from supervisors at home and abroad. …Karen Shaw Petrou, managing partner of Federal Financial Analytics, said the banks have tried to be somewhat muted in their opposition to an OLA repeal because a more forceful opposition would likely spur a backlash. …”The fear is that if they’re seen as obviously defending it, that will only reinforce the wrong impression that OLA is a big-bank bailout, so they’re saying quietly … the prospect of the kind of disorderly failure in the absence of Title II and the much more immediate threat from foreign governments is a serious challenge,” Petrou said. “If the European regulators don’t trust the way in which the U.S. would resolve a giant bank — and without OLA they won’t — they will ring-fence the U.S. banks into home-country subsidiary operations.”