FDIC Too Slow to Act

FDIC Too Slow to Act

FDIC Too Slow to Act

When Washington Mutual announced this week that they'd be settling their dispute with the FDIC for just under 10% of the original damages being claimed, many were surprised at the final cost of the settlement. But according to J.W. Verret, senior scholar with the Mercatus Center at George Mason University, the final dollar amount of the settlement misses the bigger picture.

"The real question is why didn't the FDIC do a better job of catching failing institutions early," Verret says, "The FDIC is supposed to respond before liquidation becomes necessary. But in two-thirds of bank failures after 2007, the FDIC didn't act in time and the banks went into liquidation."

"At this point, we are talking about vultures fighting over the carcass," Verret said.

That failure to act in time, according to Verret, also highlights a further issue with other financial regulations.

"This is the problem with the Dodd-Frank Act's approach to systemic risk, which gives the FDIC authority over even more financial institutions," Verret said. "In the end, today's outcome is a reminder of why Dodd-Frank makes bailouts national policy."

For more information or to book an interview with the scholars featured in this article, please contact Chad Reese, Assistant Director of Outreach for Financial Policy

Featured Scholars

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