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The ^$%#&@ US Congress running companies. Big time wrong! Big time STUPID! More laws, more regulation, more government control over everything we do.



US Is Rushing to Get More Control Of Financial Giants


By: Albert Bozzo, Senior Features Editor | 19 Mar 2009


The White House and Congress are rushing to write legislation that allows the federal government to take over and unwind the businesses of a large financial institution — such as AIG  — the way it now can with commercial banks, CNBC has learned.

The regulatory authority—similar to the FDIC’s so-called bridge bank powers—was originally expected to be included in a broader reform package addressing systemic risk. But now it's being crafted as stand-alone legislation in the wake of the public uproar over the AIG executive bonuses.

The legislation, being spearheaded by House Financial Services Chairman Barney Frank (D-Mass.) could be ready for mark-up before Congress’ spring recess, which starts April 6, according to a senior Congressional staffer. A public hearing is also expected.

“The President has asked us to fast-track,” said the source. “Drafting is going on at both ends of Pennsylvania Avenue.”

The President Wednesday referred to the pressing need for such authority “get a proper mechanism in place,” adding he had discussed the issue with Rep Frank. It is unclear who is handling it on the Senate side, but it would presumably come under the portfolio of the Finance Committee, chaired by Chris Dodd (D-Conn.)

“What we are working on is a resolution authority that would be similar—not identical, but similar to the powers that the FDIC currently has over banks,” the President said in his comments about the AIG uproar,

FDIC Chairman Sheila Bair Thursday told Congress that the government’s policy of bailing out firms because they were too big to fail had to be replaced.

Under current law, the FDIC has so-called “bridge bank authority” to take over a troubled institution with government insured deposits. The FDIC essentially keeps the bank open for a short period of time before a pre-arranged buyer—meaning another bank—assumes control and operation. In some cases, the government actually closes the bank and pays off depositors.

The FDIC, however, does not control bank holding companies, the parent companies of the commercial banks. That is the responsibility of the Fed, but the central bank is only legally allowed to make the company take so-called prompt corrective action to deal with such things as capital requirements.


There is no temporary status for that company if it is in trouble. The only legal course is the bankuptcy court process, which could entail protection from creditors or outright liquidation, neither of which would work given the complicated counter-party nature of such operations.

The legislation now in development would apply to companies that represent a systemic risk to the financial sector and the overall economy and would thus include companies such as the insurer AIG, which the government has poured tens of billions of dollars into to help avert its failure, and Citgroup, which has a huge non-banking operation, including investment and insurance services.

That government bailout of AIG has backfired on lawmakers and the Obama administration amid continuing revelations of fat bonuses for executives and other key employees at the company. Aid for financial firms, which started under the Bush administration last October, has been generally unpopular among taxpayers and voters.

Earlier this week, it emerged that some $165 million in additional bonuses were due to a group of employees, who some say contributed to the firm’s s financial problems. Those bonuses became even more of a political football when it became apparent that they were part of legally binding contracts and had to be paid. Congress has responded by drafting a variety of bills to recover the money or impose punitive taxes on it to send a message.

Though the Obama administration has been candid about both its disapproval and frustration over the bonus situation, it has tried to move beyond the current controversy by focusing on the need for new regulatory powers.

Such authority would allow the government to seize control of companies that posed a risk to the system and unwind their businesses in an orderly, yet expeditious fashion. Such authority would presumably allow the government to amend contracts, as necessary.

The regulatory vacuum first raised eyebrows about a month ago when Federal Reserve Chairman  Ben Bernanke mentioned it during a presentation to the Senate Finance Committee. That led to a chorus of calls for speedy action.

The legislation now being worked on is not yet in a stage where it addresses all the issues, according to the Congressional source. It’s unclear, for instance, where the regulatory authority would lie. Some have said the Fed is a natural choice, because it already oversees bank holding companies. Others say the FDIC should have the authority. The Treasury Dept. has also mentioned as a possible regulator.

Josie06 Josie06
56-60, F
5 Responses Mar 19, 2009

Yes pntdhorse61 ... there is NO bailout for the American people. That is who deserves it.

The feds have been dropping the ball for a long time now. It is not just the gov. to blame. Anybody can take this anyway they want. There are millions of people that disagree with what the feds are doing. But they will ***** about it, yell about it, but will not banned together and force our gov. to do the right things. People forget I think. We put those people in office and it is our right to take them out at any time if they are not doing what they should, That is to take care of the AMERICAN PEOPLE. Not to take care of other countries,not to bail out companies. Not to create a debt that has to be paid by the sweat of our brows. I said this before, if the gov. took 1 trillion dollars and gave 10 thousand dollars to everyone that made less than 100 thousand a year. That is about 100 million people. Alot of this problem would be over by now. Those 10 thousand people would pay off bills that would help the banks, they would buy mechendise that would create demand which means jobs. The result of this would be almost immediate. That is almost a garantee. The way they are doing it they still don't know if it is going to work. The one thing I am sure of, The gov.and big bus. are not looking out for the AMERICAN PEOPLE. They are taking care of themselves and themselves only.

with what the fed did yesterday with the 1T. It's the last chance to save the economy. If the fed doesn't do it just right the dollar will be no more. They are just getting things ready for when it does.

i never said complete deregulation. Deregulation has been on the governments plate since President Reagan. All of them (Reagan, Bush I, Clinton and Bush II) have done it. <br />
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The blame can be spread around. It became a real path and started quickening with Clinton and has not stopped.<br />
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i realize the Republican Congress bought out the S&L's to save them. i have never said you or anyone else was wrong in stating it.<br />
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i believe it is not the governments job to bailout, buyout or own any business in the US.<br />
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Many things former President Bush did, i certinly disagree with. He was not a conservative so quite painting me (and other conservatives) as bad. Bush II was a liberal and began this march in full. President Obama is continuing what he did ... on steroids with the spending.<br />
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Bush was a disaster in my view for his spending (never saw a spending bill he didn't like) and his enlarging the actual size of government (growing the blabbermouth)!<br />
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At times i feel you are too funny to be taken seriously! The BIG PICTURE is not in your view. It appears only the touchy feelly goody goodies are in many a persons view right now.<br />
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What about the good of the nation as a whole, all of it's citizens ... not just the few or possibly the majority (as of the last election).

Josie, the destruction of the US in only eight years by a deregulated market is not the way to continue to operate. Do you think that they need another eight years of complete deregulation and unchecked greed to completely shut down America. Should WalMart continue to insist to their suppliers that they produce their product in China, should the monied continue to take their funds off shore to avoid paying taxes, should companies move their headquarters to the Cayman Islands since it is a tax free country, one single building in the Cayman is the headquarters to more than 15,000 companies.<br />
It is appalling to me that people like yourself who works for a living and is having the rug pulled out from under you is still supporting those robbing you of everything. You absolutely amaze me with your thoughts.<br />
By the way, as I have pointed out to you several times before, the republicans bought out and controlled the savings and loans to save that industry (nobody screamed socialism then) and then after they got it under control they sold it back to private America. How easy we forget these lessons from the past. You shortsightedness and those who agree with you is beyond belief and I can only assume that logic escapes you like it does Rush Limbaugh!<br />
Call me whatever name you wish, including socialist, although I am not one, but at least I have sense enough to know when the ship is sinking so fast that if I continue to stand around I and everybody else is going to drown. It seems that you do not see the water rising as the financial boats we are riding sink so fast that it is beyond dizzying. You guys are just too funny to be taken seriously!