To further ameliorate the too-big-to-fail problem, the Congress should create a new set of authorities to facilitate the orderly resolution of failing, systemically important financial firms. In most cases, federal bankruptcy laws work appropriately for the resolution of nonbank  6  BIS Review 132/2009  financial institutions.
However, the bankruptcy code does not always protect the public's strong interest in avoiding the disorderly collapse of a nonbank financial firm that could destabilize the financial system and damage the economy. In light of the experience of the past year, it is clear that we need an option other than bankruptcy or bailout for such firms.