On Friday Fed Chair Bernanke held a speech on Financial Crisis and Community Banking at the Independent Community Bankers of America’s NCT in Phoenix, Arizona. He addressed the much discussed too-big-to-fail subject. “…the too-big-to-fail issue has emerged as an enormous problem, both for policymakers and for financial institutions generally. Creditors of a firm perceived as too big to fail have less incentive to monitor and restrict the firm’s risk-taking through adjustments to the price at which they lend money to the firm. If left unaddressed, this weakening of market discipline creates an unlevel playing field for smaller institutions, which may not be able to raise funds as cheaply, even if their individual risk profiles are better, or at least no worse, than those of their larger competitors. The erosion in market discipline distorts market behavior and can give firms an incentive to grow–either internally or through acquisitions–in order to be perceived as too big to fail….To address this issue, which should be a top priority for financial reform, policymakers will need to act …supervisors–as we are already doing–must vigorously address the weaknesses at major financial institutions with regard to capital adequacy, liquidity management, and risk management…an important element of addressing the …problem is the development of an improved resolution regime in the United States that permits the orderly resolution of a systemically important nonbank financial firm.”