The Curmudgeon contacted the American Banking Association (ABA) in an attempt to get some answers as to why the various “bail-in” and GLAC bond proposals have not been finalized as part of the Dodd-Frank Title II (or other) law. Moreover, we were concerned there was little or no Congressional oversight nor co-operation with the FDIC and U.S. Treasury Secretary, whom together have to implement the methods and procedures when a “structurally significant” bank fails. Here's what I wrote to the ABA:
We are concerned about the incompleteness of Dodd-Frank Title II in light of all the "Bail-In & GLAC bond" proposals floating around for the last two years. The key issue is preventing taxpayer bailouts of busted "too big to fail" banks. The entities are described, but there are no methods, procedures, mechanism or PLAYBOOK to execute the various scenarios that have been described by Federal Reserve Board members, academics, and lawyers. The actual "bail-in" methods and procedures for failed "structurally significant" banks are to be executed by the FDIC in conjunction with the U.S. Treasury Secretary. However, they are NOT described in Dodd-Frank Title II or anywhere else. Hence, Title II is incomplete and misleading (check references included in article).
As a result, we believe that "all hell will break loose" if a too big to fail bank goes bust anytime soon, e.g. because its derivative trading department blows up. We also are concerned that there is insufficient Congressional oversight for the writers of the Dodd-Frank law. Finally, there seems to be a lack of cooperation between Congress, FDIC, and Treasury Secretary on this entire set of Title II/ "bail-in" issues and scenarios.