In his written testimony to the House financial services committee yesterday, Timothy Geithner discussed how the government plans to prevent, or at least deal with, the failure of big financial institutions in the future. Calling current regulations “inadequate and outdated,” he called for greater supervision of major firms, stricter capital requirements, and an end to “excessive risk-taking.” He stressed that banks should take steps to avoid getting themselves into trouble in the first place, but also that they should be prepared for the worst case scenario. He notes, “major firms must be subject to a prompt corrective action (PCA) regime and be required to prepare and regularly update what some have called 'living wills.' ..."

What’s a “living will”? When it comes to human beings, a living will typically details the medical measures or treatments you’d like to receive in an end-of-life situation. A financial institution’s living will serves a similar purpose. Geithner described it as a plan for “rapid resolution in the event of distress.” In other words, the living will would map out what the firm would do when it’s on the brink of going under. It doesn’t seem like the government is interested in bringing dying banks back to life at the last minute anymore.