FSOC Recklessly Expands Too Big to Fail

It was no surprise that the Financial Stability Oversight Council (FSOC) decided last week to cite a number of nonbank firms as systemically significant, placing them in line for greater regulatory scrutiny by the Federal Reserve. What was a surprise is that â?? in the midst of a huge outcry in Congress about banks that are too big to fail (TBTF) â?? neither Congress nor the administration asked the FSOC to stop the designation process until the too-big-to-fail issue had been fully thought through. After all, by designating some nonbanks firms as TBTF â?? GE Capital, AIG, and Prudential Insurance are in the group â?? the FSOC has created a whole new set of institutions that will now be considered TBTF.