Why FDIC is Running Out of Time for Resolution Planning
by Barbara A. Rehm
Quoting Thomas Edison, Marty Gruenberg recently said, “Vision without execution is hallucination.” It’s a clever quote and the chairman of the Federal Deposit Insurance Corp. was trying to convince an audience that his agency is well on its way to ending too big to fail via its strategy to resolve giant firms that get into trouble. But for folks following this policymaking closely, the quote backfired. It’s been nearly two years since the FDIC unveiled its so-called “single point of entry” approach, which is designed to implement the Dodd-Frank Act’s mandate for orderly liquidations of systemically important financial companies. Nearly four months after that unveiling, in May 2012, Gruenberg made a big splash with his first speech on the idea at the Federal Reserve Bank of Chicago’s annual bank policy conference. Since then Gruenberg and other FDIC officials have given numerous speeches that largely say the same thing: Single point of entry will end “too big to fail.” It’s almost as if saying it often enough will make it true. That’s not a hallucination, but it’s close enough. Don’t get me wrong. The FDIC deserves a ton of credit for coming up with the idea and for its initial rollout. But 18 months have gone by since Gruenberg sketched the plan. It’s time for more progress and that means more details. Gruenberg said they are coming – and soon. “I can see why there may be impatience, but I think we’ve established credibility so far and I think we are very close to building on that,” Gruenberg said in an interview last week(Nov.27). “We’ve been moving step by step in what I think is a thoughtful way that will strengthen [the process] and add credibility.” “If we don’t see any of the operational execution by very early in the first quarter of next year, it will collapse,” said Karen Shaw Petrou of Federal Financial Analytics. “It ceases to be credible.”