Federal Deposit Insurance Corporation

Current rules about handling troubled too-big-to-fail financial institutions are insufficient, with too much discretion in the hands of regulators and more standardization needed in the case of bankruptcy, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said Thursday at a conference in New York. "We want rules that regulators can enforce without having superhuman knowledge or foresight," Plosser said. In particular, Plosser cited the Dodd-Frank bank-reform law and the Federal Deposit Insurance Corp.'s ability to take troubled firms into receivership. "As the receiver, the FDIC has expansive discretionary powers, including the ability to use Treasury funds to make advances to particular creditors in a manner that may be inconsistent with the legal priorities specified in their debt contracts if it believes that this is necessary to prevent systemic problems," Plosser said. He suggested two approaches to handling too-big-to-fail firms, including establishing a fra...

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