The Obama administration’s reform plan is “a good opening to the process,” but the priority must be eliminating the mindset that large financial institutions are “too big to fail,” Federal Deposit Insurance Corp. chairman Sheila Bair said.

“Clearly, there has been moral hazard and lack of market discipline fed by the 'too big to fail’ doctrine, and this in turn has been fed by the lack of resolution mechanism that really works for very large financial organizations, and this has been a central focus of ours,” Bair told CNBC during a televised interview.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.