More than ten years have passed since the 2008 financial crisis. In the years immediately following the crisis, systemically important financial institutions—known colloquially as too-big-to-fail firms—became a prominent subject in discussions about the underlying causes of the crisis. Indeed, the 2008 financial crisis drew into clear focus the unprecedented complexity and interconnectedness of the modern U.S. financial system. The 2008 financial crisis brought with it a new and unfamiliar type of bank run: a run on the shadow banking system—a system upon which Wall Street banks depended and of which Main Street investors were oblivious. To mitigate the systemic risks lurking in the shadow banking system, Congress enacted the Dodd–Frank Act, which established a federal systemic risk regulator, the Financial Stability Oversight Council, and empowered it to designate as “systemically important” those financial institutions whose material financial distress it determined could pose a threat to the financial stability of the United States. Once so designated, these institutions became subject to heightened prudential regulation by the Federal Reserve.

Now, less than ten years after the enactment of the Dodd–Frank Act and the establishment of the Federal Stability Oversight Council, legislators and federal regulators have begun to revisit the notion that systemically important financial institutions should be subject to heightened prudential regulation. Legislative and executive proposals for regulatory reform range from relaxing federal prudential regulation to eliminating it altogether. These proposals mistakenly prioritize the costs of designation to impacted institutions over the value of properly mitigated systemic risk to taxpayers. Although the 2008 financial crisis devastated millions, it also taught valuable lessons about the consequences of unmitigated systemic risk. Amid a plethora of proposals for financial reform, the time to revisit those lessons is now.