For the past year, a special team of US bank regulators has been on a quiet mission to end the belief on Wall Street that large banks are "too big to fail".
The team from the Federal Deposit Insurance Corp (FDIC) has hosted more than two dozen meetings with bond investors, analysts and other stakeholders to lay out in detail how a failing firm would be liquidated. One of the goals of the roadshow was to warn Wall Street not to count on a repeat of the government bailouts of the 2007-2009 financial crisis, when Washington stepped in to rescue AIG and other financial institutions out of fear that a collapse would be disastrous for the world economy.
People present at these meetings say the FDIC makes a compelling case, and there are signs that the roadshow is gradually succeeding in shifting market perceptions.
Some bond investors are demanding higher yields on bank debt that they now see as riskier because of the FDIC's plan, said Brian Monteleone, a bank credit analyst at Barclays who has participated in the FDIC meetings.
