Such institutions should be subject to tougher capital, liquidity, and risk-management requirements than other firms – both to reduce their chance of failing and to remove their incentive to grow simply in order to be perceived as too big to fail. Neither AIG, an insurance company, nor Bear Stearns, an investment firm, was subject to strong consolidated supervision.
The Federal Reserve, as the regulator of bank holding companies, already supervises many of the largest and most complex institutions in the world. That experience, together with our broad knowledge of the financial markets, makes us well suited to serve as the consolidated supervisor for systemically important nonbank institutions as well.