FDIC sees rule soon on dismantling failing banks

* FDIC to soon issue rule on resolution authority

* Designed to get rid of need for bailouts

* FDIC’s new power part of Dodd-Frank Act

WASHINGTON, Aug 31 (BestGrowthStock) – U.S. regulators will issue
an interim rule in the “near future” that will lay out how the
government plans to dismantle financial giants if they are
headed toward collapse, bank regulator Sheila Bair said on
Tuesday.

Bair, who heads the Federal Deposit Insurance Corp, the
agency that will be responsible for this resolution authority,
said the rule will be a vehicle for getting more detailed
comments.

“There is no wiggle room for bailouts here. No more
bailouts. So I think we would like to get an interim rule out
fairly quickly,” Bair said on Tuesday during an FDIC-hosted
roundtable on resolution authority.

The new authority was given to the FDIC last month in the
Dodd-Frank Act, a broad overhaul of financial regulation that
aims to prevent many of the problems that arose during the
financial crisis.

The new law deals with the issue of some banks being
perceived as “too big to fail” in part by forcing big financial
companies to write living wills that regulators would use to
dismantle them if they became insolvent.

The lack of such a mechanism forced the U.S. government to
treat shaky financial giants on an ad hoc basis during the
crisis — crafting massive bailouts for companies such as AIG
(AIG.N: ), while letting Lehman Brothers (LEHMQ.PK: ) collapse.

Financial companies, investors and counterparties are eager
for details on how the resolution authority will work,
including the treatment of creditors.

The roundtable is the first in a series of discussions that
the FDIC will have with industry executives, academics and
investors.

Mary Schapiro, chairman of the Securities and Exchange
Commission, and Gary Gensler, chairman of the Commodity Futures
Trading Commission, also attended Tuesday’s roundtable.
(Reporting by Dave Clarke and Karey Wutkowski; Editing by
Steve Orlofsky)

FDIC sees rule soon on dismantling failing banks