Dud-Frank? Post-2008 reforms played little role in bank resolutions

By  Kyle Campbell

After three bank failures in less than two months, some regulatory observers say the government’s response to such distress is little changed from 2008, raising questions about the reform efforts undertaken during the past 15 years. The legislative response to the last banking crisis, the Dodd-Frank Act of 2010, sought to create a new playbook for handling bank failures, one that would allow regulators — or, ideally, banks themselves — to wind down troubled institutions in a controlled manner. The hope was that doing so would prevent government bailouts and brokered sales that make ‘too big to fail” banks even larger. Instead, the crisis of 2023 has seen regulators make two systemic risk declarations, absorb significant losses and sell failed depositories to other banks, including the biggest bank in the country, JPMorgan Chase. “What is damning is there appears to have been no playbook,” Karen Petrou, managing partner of Federal Financial Analytics, said. “If there was, it didn’t work.” The latest failed institution to be put through this process was San Francisco-based First Republic Bank, which was seized by the Federal Deposit Insurance Corp. and sold to JPMorgan in the early hours of Monday morning, allowing the bank’s 80-plus branches to open as scheduled at the start of the workweek.