So, which is it? The largest U.S. banks are as big, bad, and TBTF as some concluded from the FRB and FDIC’s living-will rejections last week? Or are they, as FDIC Chairman Gruenberg said yesterday, now ready for orderly resolution under both bankruptcy and OLA? Can’t be both, one would think, and which it is matters more than a little not only to the course of U.S. policy, but also to the future franchise value of U.S. GSIBs. If GSIBs are resolvable now, then the sanctions in their living-will orders aren’t going to make them better, just smaller. If the FRB and FDIC mean their resolution-planning exercises to be big-bank break-up exercises, they should say so to satisfy their critics and let GSIBs know that their days are numbered in enough time for them to restructure without instigating another round of systemic risk.

Earlier this week, we provided clients with an assessment of the strategic impact of the living-will actions for each of the seven sanctioned GSIBs. This followed our review the day the decisions were handed down, which focused more broadly on the U.S. resolution-policy context and the changes likely to be made in it given the critical GAO report released just the day before. Taken together, we concluded that the new framework – at least as I understood it prior to Mr. Gruenberg’s comments – would force all U.S. GSIBs but Citigroup and many of the second- and third-wave filers to make dramatic changes to their operations with profound structural and strategic consequences.

Tearing GSIBs asunder would not only satisfy Sen. Sanders and others with a thirst for blood, but also be good policy if nothing else could save us from GSIBs, not to mention all the new SIFIs sure to fall upon their leavings. However, is it in fact necessary to force GSIBs to fund themselves and their material operating entities at peak levels to ensure orderly resolution if they haven’t gotten there yet (the living-will results) and Mr. Gruenberg says not to worry? What about all the demands for subsidiary capital adequacy instead of intra-group transfers? If so much more is needed as the orders stipulate, then how resolvable can GSIBs be? Legal structures too complex to resolve under both bankruptcy and OLA? The FRB/FDIC orders say yes, but the FDIC Chairman thinks not, and so it goes with complaints about critical infrastructure, derivatives, and all the other flaws in the living wills.

Mr. Gruenberg’s happy talk is reassuring, at least to those of us who aren’t GSIB shareholders still facing a lot of lost value as GSIBs reckon with the cost of satisfying all the objections voiced on their resolution plans. I hope he’s right because resolvable GSIBs are a critical post-crisis reform. But neither the broader market nor I can know whether to believe his optimism or the pessimism clearly expressed in the sanctions his own agency imposed in concert with the FRB. In the absence of clear criteria for what does or doesn’t make a GSIB resolvable through both bankruptcy and OLA, it’s anyone’s guess. Six years after Dodd-Frank, that’s a lot of uncertainty to accept, especially when it comes with so high a price tag for entities subject to such effervescent regulatory edicts.