August 05, 2009

After rescuing the nation's banking system from utter disaster last fall, Washington now faces an arguably much trickier task: putting the bailout genie back in the bottle.Several initiatives are on course to expire later this year, putting regulators and the White House in the difficult position of having to decide whether the nation's banking industry is strong enough to go it alone.

"They would love to get out of the middle of all this stuff if they could," said John Douglas, a former general counsel at the Federal Deposit Insurance Corp, who now heads the banking regulatory practice at law firm Davis Polk & Wardwell. "The question really is whether the financial system and capital system is vibrant enough to exit without a government backstop."