The FDIC is currently responding to one of the worst financial crises in the history of the nation’s banking system. Sheila Bair, Chairman of the FDIC, expects that 2010 “will be the high water mark for the banking crisis.”1 Just over the last two years, 268 banks have failed in the United States, which is nearly ten times the number of failed banks during the prior eight-year period.2

Against this backdrop, the FDIC hoped to find “a credible resolution mechanism that provide[d] the authority to liquidate large and complex financial institutions in an orderly way.”3 The government needed the power to address companies considered “too big to fail.” Otherwise, markets would rely on future government bailouts.4 Equally critical, according to Chairman Bair, was the enforcement of market discipline by making clear that shareholders and creditors bear their respective risks.5

The result, signed into law by President Obama on July 21, 2010, is Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”).

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