As a matter of law, Dodd-Frank ended the notion that any firm is “too big to fail.”  Banking will always involve some-degree of risk-taking….  But now, if a financial firm fails, taxpayers will not have to bear the cost of that failure.

Treasury Secretary Jacob Lew said that with a straight face at a New York financial conference earlier in the week.  Never mind that, under Dodd-Frank, not only is “too big”—systemic risk—defined by Government and not by our economy, “failure” is defined by Government and not by our economy, and the outcome of “failure”—what creditors will be allowed to recover, and by how much—will be defined by Government and not by our existing bankruptcy system.  That last, especially, means that, of course we taxpayers will be on the hook, especially to fill any gap between what Government-determined creditors will be allowed to recover and what the failed institution’s assets will support.

Lew also made a very Pelosi-esque demand in those same prepared remarks, when he got to the matter of Congressional dissatisfaction with Dodd-Frank.  While addressing the fact that three years after the law’s enactment, many (most?) implementing regulations, including highly critical ones (from the perspective of the law), have yet to be written, Lew admonished Congress not to meddle with the law.

[T]here will be time to see what is working and what is not [once regulators are finished with outstanding rules].

Treasury has to write the regulations so that we can see what is in the law…away from the fog of the controversy.

Hmm….