Importantly, as my FOMC colleague Gary Stern has pointed out, it would also mitigate moral hazard and the problem of "too big to fail" by reducing the range of circumstances in which systemic stability concerns 4 might be expected by markets to prompt government intervention.
A statutory resolution regime for nonbanks, besides reducing uncertainty, would also limit moral hazard by allowing the government to resolve failing firms in a way that is orderly but also wipes out equity holders and haircuts some creditors, analogous to what happens when a commercial bank fails.