AMPEDSTATUS: As the Financial Times notes today:
Officials fighting the next financial crisis may again bail out banks using the public purse, S&P has said, in an opinion that casts doubt on one of the fundamental tenets of US financial reform. The rating agency said on Wednesday that the US Treasury, Federal Reserve and Congress might rescue a large financial group rather than allow it to fail like Lehman Brothers. Dodd-Frank, the legislation signed into law a year ago next week, was supposed to prevent bail-outs by allowing the government to seize and wind down safely an ailing “systemically important financial institution”, or Sifi.
But in a research note, S&P said: “We believe the government may try to avoid contagion and a domino effect if a Sifi finds itself in a financially weakened position in a future crisis.”
The agencies’ views are crucial to the fight over whether the phenomenon of “too big to fail” has been ended. If not, the largest banks will continue to enjoy a funding advantage over their smaller rivals… (more)
