U.S. Seeks Expanded Power to Seize Firms Goal Is to Limit Risk to Broader Economy By Binyamin Appelbaum and David Cho Washington Post Staff Writers Tuesday, March 24, 2009; A01 The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document. The government at present has the authority to seize only banks. Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document. The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury's role, are still in flux. Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers. The administration's proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed's other responsibilities, particularly its control over monetary policy. The government also would assume the authority to seize such firms if they totter toward failure. Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG's most troubled unit. The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan. Geithner plans to lay out the administration's broader strategy for overhauling financial regulation at another hearing on Thursday. The authority to seize non-bank financial firms has emerged as a priority for the administration after the failure of investment house Lehman Brothers, which was not a traditional bank, and the troubled rescue of AIG. "We're very late in doing this, but we've got to move quickly to try and do this because, again, it's a necessary thing for any government to have a broader range of tools for dealing with these kinds of things, so you can protect the economy from the kind of risks posed by institutions that get to the point where they're systemic," Geithner said last night at a forum held by the Wall Street Journal. The powers would parallel the government's existing authority over banks, which are exercised by banking regulatory agencies in conjunction with the Federal Deposit Insurance Corp. Geithner has cited that structure as the model for the government's plans. http://www.washingtonpost.com/wp-dyn/content/article/2009/03/23/AR2009032302830_pf.html
"Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers." How would the government know the internal troubles of a company in order to determine if it should be seized? This is different than regulating the banks. The banks have clear reserve requirements, etc. that can be used to determine if it is in trouble.
Oh come on man think. When AIG called the Federal Reserve asking for $40 billion dollars, that may be a red flag raised and the exactly the kind of action that would possibly result in AIG being seized.
They better have clear rules otherwise we will get a repeat of Sheila Bair WM takeover that got bank debt markets to shutdown
Clearly there will be additional legislation passed in order for government appointed auditors with the provision of unfetered access to constantly assess/oversee a list of companies that are deemed to pose a threat to "economic stability" as defined by, the government. Watch out, you may be paying for your hamburgers twice over in the "new future", afterall, food is essential to the functioning of human performance.
I thought this was the USA, not Venezuela, Cuba, China, Russia, or any other you country that routinely pulls this crap. WTF is this country coming to?
Exactly what Obama wants, a revolution. It's a win win scenario for the Marxist Party. Regardless how it turns out, they will achieve their goal of dominate and everlasting political power.
How? The usual methods. Public outrage, political pandering (how many minorities have you promoted this year, Chairman? Did you fly to this committee hearing in a private jet? Your company still burns coal?!), "unsolicited" donations to campaigns and political parties, an army of lobbyists in DC, etc. It's McCarthy, but reversed. The war on communism failed, and we are now watching the government wage a war on capitalism. You know that companies with a lot of political pull <A href="http://www.elitetrader.com/vb/showthread.php?threadid=158539">like AIG</a> won't be penalized, but you can bet the poor outfits that do not pony up will have targets on their backs. Welcome to the new US of A. Are you a large business? You need to send money and lobbyists to DC lest the feds destroy your company and give you to your competition. You are bidding against your competition on a life or death resource known as federal power. Lose and you are going under. Better bid high, because the guys across the street from you sure will. Oh well. WIJG?
Free markets in the US went from life support to officially dead if this passes No fortune 500 company will ever fail as long as they keep their lobbying up The power for abuse and corruption will be enourmous. These powers will never be recinded and will make the executive branch godly The chinese have to wonder if we have gone off the deep end How did we survive 250 years without these powers? We will not survive the next 25