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A week from today, FDIC Chairman Gruenberg will lay out his latest thinking on large-bank resolution.  If recent history is any guide, his comments augur action advancing regional-bank TLAC rules just as his defense of the new capital rules presaged the proposal.  Mr. Gruenberg was right in 2019 when he mourned the FDIC’s inability to resolve a large regional bank; he’s wrong now if he thinks lots of long-term debt will do the Fed and FDIC’s job for them.  The agencies have all the tools they need to resolve super-regionals and they’ve one more knock-out punch to protect taxpayers:  enforceable source-of-strength authority.  None of these tools were used in the last four failures and the agencies should get their own house in order before mandating anything but urgent repairs at banks already struggling with structural market changes in the higher-for-longer regime.

Although there’s no excuse for it, there’s also no denying that the FDIC can’t resolve troubled regionals.  The Silicon Valley and Signature failures should have been handled in due course under regular FDIC intervention – preferably before collapse as the law allows.  If that isn’t enough, then the FDIC could have used its orderly liquidation authority (OLA) if the case was truly systemic and neither the Fed nor FDIC could figure out another way.  Under either regular resolution or orderly liquidation, shareholders and uninsured depositors would have suffered and that’s all to the good of a disciplined financial system.

Six weeks later when the FDIC had ample, ample …