Advertisement

Former Fed chief Paul Volcker, ex-Citigroup co-Chairman John Reed named to FDIC panel

Former Federal Reserve Chairman Paul Volcker and former Citigroup Inc. co-Chairman John Reed have been named to a Federal Deposit Insurance Corp. panel that will help the agency map strategy for unwinding too-big-to-fail financial firms when they collapse.

Volcker, who advised President Obama during negotiations over what became the Dodd-Frank Act, was named to the FDIC’s 18-member Advisory Committee on Systemic Resolutions along with Reed and current executives including BlackRock Inc. fixed-income chief Peter Fisher. The panel’s first meeting is set for June 21.

“Congress has given the FDIC a tremendous amount of responsibility to ensure that financial organizations formerly deemed too big to fail will no longer receive taxpayer-funded bailouts,” FDIC Chairwoman Sheila Bair said Friday in a statement. “The advisory committee we created brings together some of the best and brightest minds to augment the groundwork that the FDIC has already put into place.”

Dodd-Frank, the regulatory overhaul enacted last year, gave the FDIC expanded power for resolving systemically important financial firms in the event of a collapse. Lawmakers granted that authority in an effort to prevent a repeat of the market tumult that followed the September 2008 bankruptcy of Lehman Bros. Holdings Inc., which sparked a full-blown credit freeze that led to government bailouts for companies including Citigroup.

Advertisement

Bair, who is scheduled to step down July 8, pushed for the resolution authority to be placed with her agency, citing the regulator’s experience shuttering big banks such as Washington Mutual Inc. and IndyMac Bancorp. The FDIC is currently drafting rules for the resolution authority, including seeking “living wills” from firms outlining how they should be unwound in the event of a failure.

Firms subject to regulation as systemically important still must be designated by the Financial Stability Oversight Council, the panel of regulators assigned the task under Dodd-Frank.

The FDIC panel will provide guidance on the economic effects of large-firm failures and how resolution strategies would affect stakeholders. The committee, which will also address relations with overseas regulators, is expected to meet at least twice a year.

In addition to Volcker, Fisher and Reed, who has expressed misgivings about regulatory changes that permitted banks like Citigroup to become so complex, the panel includes former Securities and Exchange Commission Chairman William Donaldson, former Fed Gov. Donald Kohn, and Standard & Poor’s President Deven Sharma among its members.

Advertisement

Janine Guillot, chief operating investment officer at the California Public Employees’ Retirement System, is among the other members.


Advertisement