And this authority could be made more credible by replicating, as much as practicable, well-understood bankruptcy protocols. This replication would provide clearer rules of the road for classes of creditors in advance of any resolution. Still, the financial architecture requires additional reforms to mitigate the too-big-to-fail problem.
Preferred theory of the case: resurrecting market discipline to redress too-big-to-fail Moral hazard in the financial system is higher than any of us should countenance. There is a high burden on policymakers to mitigate it.