Posted on 10/27/2009 10:57:51 PM PDT by Libloather
Dem bill urges new US powers over financial firms
Tue Oct 27, 2009 8:16pm EDT
By Kevin Drawbaugh and Rachelle Younglai
* Financial Services Oversight Council would be set up
* Treasury would head council to monitor, address risks
* Federal Reserve, FDIC would get new authorities
* Obama says bill urgent, crucial (Updates with Obama letter to Frank)
WASHINGTON, Oct 27 (Reuters) - The U.S. government would gain far-reaching new powers to regulate, and even shut down, large financial firms that threaten economic stability under a draft bill released in Congress on Tuesday.
Congressional Democrats and the Obama administration agreed on the legislation, which seeks to protect taxpayers from having to pay for more bailouts, while holding financial firms to much higher capital standards.
"No financial system can work effectively if financial institutions and investors operate with the belief that the government will act to protect them from the consequences of their failures," President Barack Obama wrote in a letter to Barney Frank, chairman of the House of Representatives committee on Financial Services on Tuesday.
Under the bill, the Federal Reserve could limit credit exposures, block acquisitions, restrict pay and bonuses and, in extreme cases, order bankruptcy at financial holding companies it finds severely undercapitalized.
The bill states that the Federal Deposit Insurance Corp -- already able to seize and dismantle failing banks -- could extend Treasury Department credit to solvent banks and non-bank financial firms alike to prevent financial instability.
Any losses from FDIC actions would have to be repaid by "assessments on large financial companies," not taxpayers, a provision reflecting public anger over bailouts of firms such as AIG (AIG.N), Citigroup (C.N) and Bank of America (BAC.N)
(Excerpt) Read more at reuters.com ...
The bill states that the Federal Deposit Insurance Corp — already able to seize and dismantle failing banks — could extend Treasury Department credit to solvent banks and non-bank financial firms alike to prevent financial instability. Any losses from FDIC actions would have to be repaid by “assessments on large financial companies,” not taxpayers, a provision reflecting public anger over bailouts of firms such as AIG (AIG.N), Citigroup (C.N) and Bank of America (BAC.N)
[Snip]
The Biggest Moral Hazzard in History
TY/ Zero Hedge and Tyler Durden:
Good spot for that link, katiekins1. Thanks.
From the pdf link...(page 11)...[bracket mine]
“And as long as there is no regulatory reform to commence the split of TBTF [Too Big To Fail] institutions, as long as financial system crutches persist and as long as the opportunity cost of being wrong is zero (and borne only by US taxpayers), US equity markets will continue to be a scam.”
Scam upon scam upon scam.
“Everything about socialism is sham and affectation.” - 23.11 Economic Harmonies; Ch 23 Evil; Frederick Bastiat 1801-1850.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.