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US Banking Industry: 'Too Big to Fail' Is Still a Problem. Here's How D.C. Wants to End It. - by Eric Garcia

The scariest thing about addressing "too-big-to-fail" banks is that there's no dress rehearsal. For all the plans, simulations, and preparations, the only way to know that the problem of banks being excessively interconnected in the wider economy has been solved is when one of these banks fails—but doesn't take the rest of the economy with it. Until that happens, elected officials and regulators are left to look back at the 2008 debacle and argue about whether they've put the pieces in place to keep it from happening again.

But in the midst of that argument, this much is clear: These banks are as big, or bigger, than they ever have been.

"They have a potential to have a catastrophic effect," says Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corporation. "They are larger than they were at the last crisis."

That does not mean that there haven't been attempts to mitigate the problem of banks being so large that they require a bailout. In the five years since Congress passed the Dodd-Frank Wall Street reform law, regulators have implemented a suite of measures aimed at ensuring that the nation's largest banks are sound and that, should they wobble, the economy won't go with them. The question of how to handle Wall Street, and what to do about Dodd-Frank, quickly is becoming a prime point of contention early in the 2016 presidential campaign.

To put it mildly, there's no consensus on whether Dodd-Frank has adequately addressed the too-big-to-fail question, or even if regulation is headed in the right direction.

Read more: Too Big to Fail' Is Still a Problem. Here's How D.C. Wants to End It. -

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