In this report, FedFin assesses the House Financial Services’ much anticipated hearing examining whether Title I and Title II of the Dodd-Frank Act (see Reports in the SYSTEMIC series) have permanently enshrined TBTF. Chairman Hensarling (R-TX) reiterated his strongly-held views that these sections of the law give large firms undue advantage, and although Ranking Member Water’s (D-CA) Democratic colleagues defended Dodd-Frank, discussion focused particularly on regulatory discretion over the use of OLA, with Republicans reiterating their preference for the certainty of the Bankruptcy Code. As anticipated, FRB-Dallas President Fisher, FRB-Richmond President Lacker, and FDIC Vice Chairman Hoenig agreed that TBTF remains unresolved, while Former FDIC Chairman Sheila Bair defended OLA, although she readily acknowledged that additional work is needed on the resolution framework and living wills. Interestingly, discussion did not produce specific policy responses from the GOP, although Rep. Capuano (D-MA) indicated he has not only introduced on TBTF bill (see FSM Report TBTF10), but now also plans one to mandate the safety-net disclosers proposed by Mr. Fisher. Other issues discussed at the hearing analyzed in this report include GSE reform, capital requirements, derivatives, and FMUs.
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