Going forward, reforming the system to enhance stability and to address the problem of "too big to fail" should be a top priority for lawmakers and regulators. In particular, recent events have revealed a serious weakness of our system: the absence of well-defined procedures and authorities for dealing with the potential failure of a systemically important nonbank financial institution.
In the case of federally insured depository institutions, the FDIC has the necessary authority to resolve failing firms; indeed, in situations in which the failure of a firm is judged to pose a systemic risk, the FDIC's powers are quite broad and flexible. No comparable framework exists for nondepository financial institutions.