There are important truths in both the economic and the political arguments against TBTF institutions. However, there are also important limits to the truth of both arguments. I believe the limits are more central than the truths, and that if anything, Dodd-Frank has gone too far in focusing on...

Perhaps the leading critique of the Dodd-Frank Act is that it does too little to address the problem of too big to fail (“TBTF”) financial institutions. The critique of TBTF institutions has two main components. The economic argument focuses on a major moral hazard problem. The political...