The market won't believe the U.S. government will liquidate, rather than bail out, a failed financial institution under newly legislated authority until it actually does so, a top Federal Reserve official said on Monday.
Wall Street reform passed this summer created a facility to wind down large financial institutions whose failure could have wide-reaching impact.
"My own sense is that the new facility will not have the credibility needed to deter the perception of too big to fail until it is actually used successfully," said James Bullard, president of the Federal Reserve Bank of St. Louis.
© 2022 Thomson/Reuters. All rights reserved.