Thomas Baxter of the Federal Reserve Bank of New York cites Too Big to Fail: The Path to a Solution

Yesterday, in a speech before the International Insolvency Institute, Federal Reserve Bank of New York General Counsel Thomas Baxter cited Too Big to Fail: The Path to a Solution, a recent report from the Bipartisan Policy Center’s (BPC) Financial Regulatory Reform Initiative.

In reflecting on the response to the failures of systemically important financial institutions, Baxter drew from language found in BPC’s work:

“The failure of AIG, especially given the context where Lehman had failed the day before, would have triggered knock-on failures throughout our financial markets, and ignited a panic that would have produced, almost inevitably, severe financial instability. In a recently published report, the Bipartisan Policy Center said: ‘If the only choices are between bailout and fire-sale liquidations or value-destroying reorganizations that can result in contagious panic and a collapse of the financial system, responsible policymakers typically choose a bailout as the lesser of two evils.’ In the early morning of September 16, 2008, we are fortunate that the people making the decision to rescue AIG were all responsible policymakers.”

Read Baxter’s full remarks here.