Do you see any way left for the government to bail out a financial institution?
BAIR: No, and that’s the whole idea. It was too easy for institutions to come and ask for help. They aren’t going to do that. This gives us a response: “Fine, we will take all these essential services and put them in a bridge bank. We will keep them running while your shareholders and debtors take all your losses. And oh, by the way, we are getting rid of your board and you, too.”
The whole idea is to get market discipline back.
That’s what ending “too big to fail means.”
Just a refresher: Under the proposed legislation, the FDIC would be given the authority to unwind failing financial institutions. Bair is a former aide to Republican Senator Bob Dole and was appointed to the FDIC’s top job in 2006 by President Bush.
UPDATE: Ezra Klein has more along the same lines from Mark Warner. Worth noting: Corker and Warner drafted this portion of the legislation together, and with plenty of input from Bair. (Corker told me it was Bair who insisted on the $50 billion number for the resolution fund, while he vacillated between everything from $75 billion to nothing.)