What phrase describes the concern that large financial institutions could trigger systemic crises, addressed by the Dodd-Frank Act?

• A. Moral Hazard
• B. Too Big To Fail
• C. Basel III
• D. Laissez-Faire

Answer: (B)

The main idea is about systemic risk from very large banks whose failure could pull the whole financial system down. The exact phrase that captures this concern is “Too Big To Fail.” It describes the worry that some institutions are so large and interconnected that their collapse would cause widespread economic damage, making government rescues more likely. The Dodd-Frank Act was built to address that risk by strengthening how big banks are regulated and how failures are handled. It created oversight to identify and monitor systemic risk, plus tools like living wills that show how a failing bank could be wound down without crashing the economy. It also set up mechanisms for orderly liquidation and higher capital and liquidity standards to reduce the chances of a crisis. While moral hazard talks about the incentive to take big risks because a bailout might occur, and Basel III or laissez-faire refer to other concepts, the description of the concern that large institutions could trigger a systemic crisis is best captured by Too Big To Fail.