First would be creation by Congress of a special resolution procedure for systemically important financial firms. The Federal Deposit Insurance Act establishes such a process for banks, but not for the holding companies of which they are part, or for important financial firms that do not own commercial banks.
A regime that raised the real prospect of losses for shareholders and creditors would add a third alternative to the unattractive existing options of bailout or disorderly bankruptcy. The consequent increase in market discipline before severe financial distress arises could be a key advance in the containment of the too-big-to-fail problem.