New analysis from the Federal Reserve Bank of New York casts doubt on the idea that regulators have ended the perception that big banks would get rescued by the government in a crisis.
The New York Fed's research is the latest entry in a number of studies that have sought to answer whether big banks remain "too big to fail" in the wake of the 2010 Dodd-Frank financial reform law that created new regulatory powers meant to prevent future bailouts.
"[T]he evidence suggests that rating agencies and market participants may have some doubts about the ability, so far, of the Dodd-Frank Act to deal with 'too big to fail,' " New York Fed researchers Gara Afonso and João Santos wrote in a post published by the regional Fed bank Wednesday.
The economists addressed the question in two ways. First, they surveyed ratings agencies' perceptions of whether the government would be forced to support banks in an emergency. The results are mixed: Fitch says no, Moody's says maybe, and Standard & Poor's says yes.Read more on WashingtonExaminer.com