May 15, 2014
30 Years After the Failure of Continental Illinois Bank: Have We Solved Too Big to Fail?
A conference organized by the Stigler Center of the University of Chicago’s Booth School of Business with financial support from The Clearing House.
One day conference to analyze the impact of the Continental Illinois Bank’s failure and bail-out in 1984 on the development of “too big to fail” in the US and the subsequent regulatory, supervisory, and market changes that have affected expectations about perceptions of government support.
Background: On May 17, 1984, regulators took over the failing Continental Illinois Bank, one of the ten largest banks in the US at the time. The government provided complete protection to all depositors and liability holders against loss. When questioned about the intervention in a congressional hearing the following September, the comptroller of the currency said that roughly the largest 11 banks in the US would receive the same treatment if they were in trouble. This became the modern origin of “too big to fail” in the US. Concerned about the moral hazard problems and unequal treatment, Congress and regulators worked to change the perceptions of government support through various regulatory actions and the passage of FDIC Improvement Act of 1991. The 2010 Dodd-Frank Act contains a number of provisions aimed at mitigating “too big to fail” and debate continues about their implementation and effectiveness. The conference speakers will contribute to this important policy debate.
See agenda for more information.