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Treasury Secretary Tim Geithner will push for unprecedented new regulatory powers on Tuesday to seize financial institutions whose failure would pose serious risks to the U.S. financial system, according to two senior administration officials.
Geithner is expected to make his case in testimony before the House Financial Services Committee.
With such "resolution authority," the federal government could intervene and aggressively reorganize a troubled business -- such as insurance giant AIG -- before its problems ripple through the global financial system, the administration officials said.
In the absence of such early intervention, AIG ended up needing a taxpayer bailout of at least $170 billion to contain financial instability.
The authority would allow the government to sell or transfer assets and components of a troubled company, including renegotiating or dissolving executive compensation agreements and addressing risky derivatives portfolios, the officials said.
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.
Originally posted by jam321
Congress should be weary of the powers it gives away to the executive branch.
It is Congresses job to write laws to regulate businesses to ensure that businesses serve the best interest of the community as a whole.
Originally posted by skeptic1
I don't know what to think about this.
The government taking control of companies that are a risk to the economy?
People are either blind or don't care.
Sort of reminds you of an "economic" Patriot Act. huh?
Geithner to seek Unprecedented Powers
"Banks also failed in 2008," Frank said. "But the fact is that we have in place mechanisms . . . that contained the damage. . . . We need to give somebody, somewhere, in the federal government. . . the authority to do what the FDIC can do with banks.
Geithner said such authority would have allowed the government to bail out AIG last year at a far lower cost to taxpayers, a position backed by Federal Reserve Chairman Ben S. Bernanke.