Too big to fail or too hard to remember? Lessons from the New Deal on dealing with systemically important institutions

The global financial crisis has highlighted the problem of how to create effective resolution schemes for systemically important institutions. This is not a new phenomenon. Exactly the same considerations where at play when the first systemic attempt was made to regulate capital markets in the United States in the aftermath of Roosevelt's election in 1932. Then the contours of the problem where defined by state-federal rather than intergovernmental relations. The focus was on the electricity and gas markets rather than the financiers who facilitated their expansion. What becomes clear from an evaluation of the history is the importance of political will. The paper argues that the key difference between the 1930s and today is not the geographic difference but the lack of political will to deal with a sector that has the capacity to subvert democratic goals.