The Dilemma of Bailouts
By Roy C. Smith
Ever since the bailout of Continental Illinois Bank in 1984, bank bailouts have been an unpopular device invoked to protect the financial system from risks posed by troubled banks deemed too big to fail. Although the Dodd-Frank Act prohibits taxpayer-funded bailouts, it leaves the financial system exposed to meltdowns and promotes the shifting of risk from large systemically important financial firms to smaller, less-regulated ones.
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