A Lack of Resolution

The failure to resolve¿that is, impose a quick death penalty on¿enormous financial intermediaries such as Lehman Brothers and AIG damaged the ability of the government to respond to the financial crisis. But expanding resolution authority to cover new systemically significant institutions¿which is one of the lynchpins of financial regulatory reform¿poses a problem of legitimacy with constitutional implications, as resolution authority is usually exercised with almost no predeprivation process and little postdeprivation compensation. At the same time, banking regulators have failed, every time they have been given more resolution authority, to exercise that authority when it is needed. This Article reassesses resolution authority.

It proposes (1) domestic solutions to protect against government overreach and (2) an international context to deal with the problem of underreach.