Today, Rep. Ed Royce (R-CA), a senior member of the House Financial Services Committee, made the following statement at today's hearing entitled, "Does the Dodd Frank Act End 'Too Big To Fail'?"
"Today, the top ten financial firms in size account for 64 percent of total assets, up from 25 percent in 1990. Because of their implicit government backstop, many of these firms benefit from lower borrowing costs, which according to various studies range from 78 to 100 basis points.
"By definition this implicit subsidy has and will continue to erode market discipline, thus further weakening our financial system.
"Yet – according to the authors of Dodd-Frank – we are now in a much better position to resolve these Too Big to Fail firms when the next crisis hits. Under the new Orderly Liquidation Authority we can have our cake and eat it too. Regulators will be able to stabilize the financial system without bailing out creditors or counterparties.
"The truth of the matter is – in times of crises – regulators have always and will always err on the side of more intervention and more bailouts. Orderly Liquidation Authority does little more than facilitate this process.
"As a result, Too Big to Fail not only lives on, it’s further compounded. I hope we take steps to correct this failure in the coming months and reinstate market discipline."