Academic

Barney Frank said today that resolution authority would get rejiggered by December; it is turning into a centerpiece of regulatory reform:

• The government's idea is that it should be able to do to Lehman and other systemically significant financial institution what the FDIC did to Washington Mutual; whip in there, fail the institution, sell it or part of it off quickly, and keep thing going the next day.  Sounds pretty sensible, but the FDIC is only able to whip in to banks and thrifts because it has examiners in there regularly.  Will that go to the Lehmans and Long Term Capitals of the world now?
• Britain wants banks to come up with "living wills," or plans for what happen when they go bust.  This is either an innocuous effort to get them to list all their subsidiaries, their off-balance sheet Cayman Mark 7 Excelsior Plus version 6 special investment vehicles, and say with whom they should be packaged upon insolvency.  Or its an attempt to con banks into admitting that they need higher capital reserves and that they are hiding taxable income (which might not be a bad thing either).  For this reason, Gillian Tett thinks banks will resist the innovation strenuously.
• And Europe is worried about compensation in the event of resolution, about which I hear little in the United States.
• It all makes resolution authority during the G20 quite an interesting issue ... at least, for Pittsburgh.  But it is not one where I think the various governments are close to reading from the same sheet music.  Look for living wills to be resolved more at the domestic, rather than multinational, level, I think.