Recipe for a Bailout: Meet SIFI

The Financial Stability Oversight Council (FSOC ) announced on Tuesday its final regulations on the procedure to designate SIFIs ('systematically important financial institutions'). American Enterprise Institute (AEI) financial services expert Peter Wallison has written extensively on this process and the threat it poses to the US financial system.

Among his key points:
•    The FSOC decision will set the entire financial services industry on a course toward domination by a few large firms that have been chosen for special government attention.
•    All of these large firms are in competition with one another, so the Fed will have the power to pick winners and losers among business models.
•    Under Dodd-Frank an unwholesome partnership between the government and big finance is actually legislated.
•    The Fed's direct control over the day-to-day operations of the SIFIs it will supervise thus gives both the Treasury secretary and the Fed chair an opportunity to exert pressure on the largest financial firms for support of administration policy.
Find more of Peter Wallison's work on SIFIs here.

Peter Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at AEI and previously served as general counsel of the Treasury Department, as White House counsel to President Reagan, and as a commissioner on the Financial Crisis Inquiry Commission. He can be reached at pwallison@aei.org or through his assistant steffanie.hawkins@aei.org.

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