In July 2011, the Federal Deposit Insurance Corporation (FDIC) promulgated new rules implementing Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules permit recouping compensation paid to senior executives and directors of failed nonbank financial institutions...

Neither the FDIC's recently announced resolution policy for failed financial institutions nor academic studies on systemic risk address the micro-level managerial incentives resulting from the Dodd-Frank Orderly Liquidation Authority's incapacity to respond to simultaneous balance-sheet...