OREGON LAW REVIEW crisis revealed fundamental weaknesses in the financial regulatory systems of the United States, the United Kingdom, and other European nations. Those weaknesses have made regulatory reforms an urgent priority. Publicly funded bailouts of" too big to fail"(TBTF) financial institutions during the crisis provided indisputable proof that TBTF institutions benefit from large explicit and implicit public subsidies, including the expectation that such institutions will receive comparable public support during future emergencies. TBTF subsidies undermine market discipline and distort economic incentives for large, complex financial institutions (LCFIs) that are viewed by the financial markets as likely to qualify for TBTF treatment. 5 Accordingly, as I argued in a recent article, a primary objective of regulatory reforms must be to eliminate (or at least greatly reduce) TBTF subsidies, thereby forcing LCFIs to internalize 6 the risks and costs of their activities.

In July 2010, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. 7 Dodd-Frank's preamble proclaims that one of the statute's primary purposes is" to end'too big to fail'[and] to protect the American taxpayer by ending bailouts." 8 As he signed Dodd-Frank, President Obama declared," Because of this law,...[t] here will be no more taxpayer-funded bailouts. Period." 9 Dodd-Frank does contain useful reforms, including potentially favorable alterations to the supervisory and resolution regimes for LCFIs that are designated as systemically important financial institutions (SIFIs). However, this Article concludes that Dodd-Frank's provisions fall far short of the changes that would be needed to prevent future taxpayer-financed bailouts and to remove other public subsidies for TBTF institutions. As explained below, Dodd-Frank fails to make fundamental structural reforms that could largely eliminate the subsidies currently exploited by LCFIs.