T he prospect of a large financial institution's failure often presents policymakers with a stark choice. Regulators can "bailout" a distressed institution, risking taxpayer money and arguably creating incentives for management, shareholders, and creditors of similar institutions to take excessive risks. Alternatively, the government can allow the institution to fail, running the risk of financial destabilization. Before the 2007-2009 financial crisis, regulators relied on a variety of prudential regulations, federal deposit insurance, and the Federal Reserve's emergency lending power to limit the risk of commercial bank failures. Commercial banks are also subject to a special insolvency regime administered by the Federal Deposit Insurance Corporation (FDIC), in which the FDIC has robust authorities to rapidly resolve failed banks outside of the Bankruptcy Code. However, many non-bank financial institutions fall outside the ambit of these regulations despite facing risks similar to those confronting commercial banks. Many commentators viewed the distress and failure of a number of these institutions during the 2007-2009 crisis as highlighting the inadequacy of existing prudential regulations for such firms, and of the Bankruptcy Code for resolving their failure. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) adopted two general solutions to these perceived problems. First, Title I of the Act created the Financial Stability Oversight Council (FSOC) and granted it the authority to designate systemically important non-bank financial companies for enhanced prudential regulation by the Federal Reserve. Second, Title II of Dodd-Frank established the Orderly Liquidation Authority (OLA), a special resolution regime outside of the Bankruptcy Code that can be invoked for systemically important financial institutions. As discussed in more detail below, federal regulatory agencies have pursued a number of measures to implement Titles I and II of Dodd-Frank. And 10 years after the crisis, legal commentators continue to debate whether these provisions have improved the resiliency of the financial system. This report provides an overview of how regulatory agencies have implemented Dodd-Frank's systemic risk provisions concerning non-bank financial institutions, and the legal debates surrounding proposals to repeal or change those provisions. In order to provide necessary background, the first two sections of the report discuss the nature of the "too-big-to-fail" problem and the 2007-2009 financial crisis. The report then provides an overview of Titles I and II, their implementation by the relevant federal agencies, criticisms of those provisions and responses, and legislative proposals to change them. An Appendix to this report contains a glossary that defines certain key terms in the report. When large, interconnected financial institutions become distressed, policymakers often face a choice between (1) a taxpayer-funded bailout, and (2) the destabilization of the financial system—a dilemma that commentators have labeled the "too-big-to-fail" (TBTF) problem. Two features of the financial system help explain the origin of the TBTF problem. First, banks and certain other financial institutions are almost always highly leveraged, meaning that their shareholder equity is a small fraction of their total assets, and that they accordingly fund their assets with large amounts of borrowing. Second, banks and certain other financial institutions often fund themselves with large amounts of short-term debt, while investing in longer-term loans and other illiquid assets—a practice called "maturity transformation." While commentators generally agree that maturity transformation is socially valuable, the process makes financial institutions vulnerable to liquidity "runs." That is, when a financial institution's short-term creditors become concerned about its solvency or liquidity, they have incentives to demand immediate conversion of their claims into cash, or to reduce their exposure in other ways that force the institution to sell its illiquid assets at significantly discounted prices. A "run" on one financial institution can spread to other institutions that do business with it. Small banks typically hold deposit balances at larger banks, and large banks, securities firms, and insurance companies often face significant exposure to one another through their over-the-counter derivatives portfolios. Accordingly, troubles at one financial institution can spread to others, resulting in additional "runs" and a "contagious panic throughout the financial system that causes otherwise solvent financial institutions to become insolvent." This type of financial "contagion" can cause asset price implosions as institutions liquidate assets in order to meet creditor demands, further impairing their ability to lend and the ability of businesses to raise capital. Faced with a choice between bailouts and economic collapse, policymakers have generally opted for bailouts, arguably creating incentives for financial institutions to take excessive risks and grow larger than is socially optimal. The 2007-2009 financial crisis highlighted the significance of the TBTF problem. During that time, the United States experienced what many commentators believe was the worst financial crisis since the Great Depression, triggering a severe recession. According to many observers, a principal cause of the crisis was the collapse of a bubble in the housing market that had developed in the early and mid-2000s. As this bubble popped over the course of 2007 and 2008, many financial institutions experienced large losses related to the real estate market. In March 2008, Bear Stearns—the fifth largest American investment bank at the time—informed the Federal Reserve that it was unable to refinance its short-term debt as a result of a "run" by its short-term creditors. Believing that the bankruptcy of Bear Stearns raised "the potential for contagion to similarly situated firms," and the possibility of "serious[] disrupt[ions]" to the stability of financial markets, the Federal Reserve exercised its authority to lend to non-banks in "unusual and exigent circumstances" under Section 13(3) of the Federal Reserve Act. According to then-Chairman of the Federal Reserve Ben Bernanke, policymakers "were reasonably sure that [Bear Stearns's] unexpected bankruptcy filing would ignite ... panic." A bankruptcy proceeding, Bernanke explained, could seriously damage the money market funds that lent to Bear Stearns and other corporations, and "lock up the cash of many other creditors, potentially for years." Likewise, according to Bernanke, unwinding Bear Stearns's derivatives portfolio would have "prove[n] chaotic" because of its size and complexity. Moreover, a decision by JP Morgan, the "clearing bank" for Bear Stearns's repurchase agreements (repos), to liquidate collateral on behalf of Bear Stearns's creditors could drive securities prices down even further, "leading to a new wave of losses and write-downs" and possible "runs" on other investment banks. Accordingly, on March 14, the Federal Reserve Bank of New York (New York Fed) extended a bridge loan of $12.9 billion to Bear Stearns as it worked to orchestrate a deal to save the investment bank. On March 17, the Federal Reserve shepherded an acquisition of Bear Stearns by JP Morgan. In order to facilitate the acquisition, the Federal Reserve again exercised its Section 13(3) authority, creating an entity called Maiden Lane LLC and lending it roughly $29 billion to purchase certain mortgage assets from Bear Stearns. Although the Bear Stearns rescue temporarily calmed markets, similar troubles surfaced later in 2008 at Lehman Brothers (Lehman), the nation's fourth largest investment bank at the time. Over the weekend of September 12, the New York Fed attempted to coordinate a private-sector solution that would avert a Lehman bankruptcy. During these negotiations, regulators took the position that no government money would be committed to rescuing Lehman, unlike the case of Bear Stearns six months earlier. The government's attempts to broker an acquisition of Lehman ultimately failed. Bank of America, one of the potential acquirers, purchased the also-troubled investment bank Merrill Lynch instead. British regulators of Barclays, another potential purchaser, refused to approve a proposed deal without a shareholder vote. Unable to secure government support or find a private buyer, Lehman declared bankruptcy on September 15, 2008. Lehman's bankruptcy reverberated throughout financial markets. On September 15, the Dow Jones Industrial Average dropped more than 500 points, its worst single-day decline in seven years. Shares of Goldman Sachs and Morgan Stanley, two of the largest remaining investment banks, lost an eighth of their value. Lehman's bankruptcy also precipitated a "run" on money market funds. The Reserve Primary Fund, a large fund that had invested in Lehman's commercial paper, "broke the buck," meaning that its asset value per share fell below $1. Because money market investors had come to expect that fund shares would always be worth $1, the troubles at the Reserve Primary Fund precipitated a $300 billion "run" on other funds, threatening a key source of short-term financing for large and medium-sized companies. Also in September 2008, American International Group (AIG)—the nation's largest insurance company at the time—came under heavy financial pressure. During the real estate boom, one of AIG's affiliates had accumulated significant exposure to the housing market by selling "credit default swaps" (CDSs) on mortgage bonds, which provided their purchasers with credit protection in the event that the bonds defaulted. On September 15, the day Lehman declared bankruptcy, AIG suffered a credit rating downgrade that required it to post margin on its CDS obligations. Later that day, AIG informed the New York Fed that it was unable to access the commercial paper market in order to meet the margin call. As it had done with Bear Stearns, the Federal Reserve invoked its Section 13(3) authority to rescue AIG, reasoning that an AIG bankruptcy would have devastating effects on the financial system. On September 16, the Federal Reserve announced that it would provide AIG with an $85 billion credit line in exchange for a 79.9 percent stake in the firm.