Due to being a bit under the gun before taking off on holiday (I hope you all enjoyed the posts from Matt Stoller, Lambert, and the other guest writers), we didn’t address a May 10 speech by the acting FDIC chairman, Martin Gruenberg, on the FDIC’s current thinking on how to resolve so called systemically important financial institutions, or SIFIs. I’m turning to this now because I see some people who ought to know better, such as the normally solid John Hussmann, taking the FDIC”s claims at face value.

As an overview, Dodd Frank gave the FDIC new powers for resolving large, complex financial institutions, which are often referred to as “orderly liquidiation authority” or “Title II resolutions”. Nowhere does the Gruenberg speech mention that the FDIC does not have the authority to put a megabank down; it requires Fed and Treasury approval as well. So it seems unlikely, in the wake of Lehman, that any Administration is going to hazard euthanizing a foundering financial institution using an untested processes.