Martin Gruenberg, the acting chairman of the Federal Deposit Insurance Corp, said the agency will soon be meeting with financial institutions, investor groups, public interest groups and academics.

The goal, he says, is to shoot down the idea that the government does not yet have the smarts or the guts to smoothly dismantle failing financial firms that are so large and complex that their collapse would threaten markets.

"Too big to fail" was a buzzword in the 2007-2009 financial crisis when the FDIC only had the power to unwind traditional banks, not firms such as Lehman Brothers or insurer AIG.

The result was massive taxpayer-backed bailouts or in the case of Lehman, a failure that nearly brought global markets to their knees.

The post-crisis Dodd-Frank financial oversight law gave the FDIC broad "resolution" power over non-bank financial firms. But markets are not yet convinced that government officials will pull the trigger on that power, or if the FDIC can pull off a major dismantling.

In the meantime, big financial firms still perceived as "too big to fail" have an advantage over their smaller rivals.

"I don't know that we're going to persuade everybody, but if we can even move the center of gravity a little bit in terms of persuading people that we are really quite serious about this ... If we can do that, we really will have accomplished a lot," Gruenberg said in an interview this week on the sidelines of the Independent Community Bankers of America (ICBA) annual convention.

Regulators and analysts say the doubts are manifested in the uneven playing field, in which the largest U.S. banks enjoy benefits such as cheaper funding costs because of investors' belief that the government will not let the biggest firms fail.

And there are questions of how regulators will act if there is more than one bank in trouble.

"If you have a herd of wounded elk, that might be different," said Cam Fine, head of the ICBA, which has pushed regulators to get tougher with its members' larger competitors.

Showing that the FDIC has the capability to liquidate a large bank if needed is part of combating this idea and instilling more "market discipline," Gruenberg said.

Gruenberg said there is not yet a schedule for the meetings, but said the agency is taking this approach because it has made significant progress in setting up the architecture, plans and staff needed to carry out the new resolution powers.

"I think now we are really at the point where we have to go outside the regulatory community and speak more publicly to interested parties," he said.

(Reporting By Dave Clarke; editing by Matthew Lewis)

• A Permanent Economic Emergency