Under this provision, resolution of a failed depository need not be least-cost, and uninsured creditors may be protected if it is determined that a least-cost resolution would "have serious adverse effects on economic conditions or financial stability" and that a resolution that is not least-cost would "avoid or mitigate such adverse effects."
Some critics have argued that the systemic risk exception maintains a policy of too-big-to-fail, thus undermining FDICIA's other efforts to reduce moral hazard, encourage market discipline, and limit taxpayer liability, not to mention putting small banks that are "too-small-to-save" at a disadvantage. In my judgment, these criticisms are off the mark.