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How are we preparing for the next financial panic?

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When the next financial crisis hits — an event that may be years or decades away — we will learn whether this Congress and the president drew the right lessons from the 2008-09 financial crisis. Congress is arguing over whether government can avoid “bailouts” of large financial institutions and still prevent a full-blown crisis. With all of President Trump’s trials and tribulations, hardly anyone is paying attention.

The debate goes to the heart of the government’s role in the financial system. During the 2008-09 crisis, the Federal Reserve, Treasury and Federal Deposit Insurance Corporation (FDIC) rescued a variety of large financial institutions, including the insurance company AIG, Citigroup and many banks and lenders. But the rescue provoked a public backlash; many Americans felt that Wall Street was protected while Main Street wasn’t.

To address this complaint, the Dodd-Frank law — the Obama administration’s response to the financial crisis — created a complicated system under which troubled financial institutions could borrow temporarily from the Treasury........

© Washington Post