US Treasury Secretary: "We need the ability to seize firms"
Wednesday, March 25, 2009
Treasury Department secretary Timothy Geithner and the Obama administration are pressuring Congress to allow the government to seize troubled financial institutions such as insurance companies and investment firms. Currently, banks are the only such entities that the government has authority to take over.
Speaking before the House Financial Services Committee, Geithner said "The United States government does not have the legal means today to manage the orderly restructuring of a large, complex non-bank financial institution that poses a threat to the stability of our financial system."
Committee Chairman Barney Frank (D-MA) agreed, saying, "When non-bank major financial institutions need to be put out of their misery, we need to give somebody the authority to do what the FDIC can do with banks."
Geithner would work with the White House and Federal Reserve to execute any such takeovers.
The expanded powers would have allowed the seizure of companies such as pariah AIG, which has already received US$180 billion in government aid. The recent controversy over the payment of bonuses has bumped up the plan to high priority. It was initially to have been part of a more comprehensive overhaul by the government of the financial regulatory system.
Not all are happy with the proposal. Republican House minority leader John Boehner derided the plan, saying it would be "an unprecedented grab of power."
Maxine Waters (D-CA) criticised the government for its lack of transparency in dealing with the current crisis, and questioned Geithner on whether firms such as Goldman Sachs had received preferential treatment by the government. Such probing may indicate reluctance on the part of Congress to grant the expanded powers.
Other than simply taking over a firm, the government would also be able to purchase its assets, guarantee losses, and take out a partial ownership interest.
"It is a terrible, tragic thing that this country came into this crisis with such limited tools for trying to protect the economy itself from the kind of distress that would come as the system came back down to Earth," Geithner summarized.
- "U.S. seeks expanded power to seize firms" — MSNBC.com, March 24, 2009
- Jackie Calms and Brian Knowlton. "Treasury Chief Seeks Wider Power to Seize Troubled Firms" — The New York Times, March 24, 2009
- David Goldman and Jennifer Liberto. "AIG shows 'broad failures' of system" — CNNMoney.com, March 24, 2009