Geithner Seeks Broad Power To Seize Firms

Washington Post: Treasury Secretary To Ask Congress For Expanded Authority To Take Over Troubled Financial Companies

(Washingtonpost.com)  This story was written by Washington Post Staff Writers Binyamin Appelbaum, David Cho and Debbi Wilgoren.

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The Obama administration will ask 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, White House spokesman Robert Gibbs said this morning.

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 government at present has the authority to seize only banks.

Geithner will testify alongside Federal Reserve Chairman Ben Bernanke at a hearing before the House Financial Services Committee that begins at 10 a.m. Although the stated focus of the hearing is the controversial bonus payments AIG awarded its employees after receiving the government bailout, Geithner will try to advance the argument that the government needs more tools in its arsenal in order to right the nation's economic ship.

"We need resolution authority to go in and be able to change contracts, be able to change the business model, unwind what doesn't work," Gibbs said on CNN in one of several morning television interviews aimed at promoting the administration proposal. " ... This is the exact type of authority that will allow us to deal with the problems in AIG ... that will address the systemic risk without having to put [a failing firm] in bankruptcy."

Giving the Treasury secretary authority the power to seize 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 an internal administration document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned yesterday that the details, including the Treasury's role, are still in flux.

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.

"This is common sense. This isn't anything crazy," Gibbs told CNN. " ... If the Treasury had resolution authority on AIG, you wouldn't have to put it in bankruptcy to change executive compensation, you could do that automatically."

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.

[swin5]

Rumor has it that once Geithner gets this power he is going to take over H & R Block and Jackson Hewitt so that he can get more help in doing his income tax and also help for other Comrade Obama cabinet members.

[sjc_1]

"There's nothing really to "take it apart"...

I can see other insurance companies taking an interest in parts of AIG. Right now we are in a serious credit and financial bind. This may not be possible without the government talking to those companies and coming to some agreement. I think that it is just recklessly irresponsible for people to say "let them fail", as if there are no consequences for that sort of action..or rather inaction.

[noloyalisti]

Thanks God we are finally going to reel in the out-of-control nasty corporate culture that has bankrupted America. Times change and it is time to change the way we ALL look at this criminal big corporate culture in America. They have become the plague on all of us.

[frustratedsr]

Nationalizing businesses is not the way our democracy works. Banks have FDIC backing and input. However, govt bureaucy being what it is, the Treas Secy or any other federal agency does NOT need the authority to take over other businesses! THIS SHOULD NEVER BE APPROVED BY CONGRESS!

[noloyalisti]

Time to nationalize the banks, oil companies and medical insurance and pharmaceutical corporations. Time to have the people own the means of production. Oh no, socialism. I''m so frightened without my corporate masters telling me what to do, what to eat and how to spend my money.

[Serf_12]

"That is somewhat analogous to letting a building fall rather than take it apart.
There is a lot of damage a falling building can do to people and other structures. If you take it apart under controlled circumstances, you reduce the risk of damage and you can salvage some of the parts."

That's nice in theory, but the government only knows how to blow things up at our expense. There's nothing really to "take it apart", they've already stolen all the money. If there were parts worth salvaging then another solvent/responsible business would buy it. Since nobody wants it then that should tell you how much it's worth. This "too big to fail" stuff is BS.

[DE58]

The blame game!!!! What does it matter who did what and when. Neither party is clean in this one. We are all in this mess together and the Government does not know how to solve it so they do what they do best...spend money and grab power. If you think about it, we are to blame because we let them. All the people complaining about the situation should think about running for an office. Oh wait.....then they might have to think instead of blame and call names.

[philabias]

JUST ANOTHER BANKER POWER GRAB. STOP THIS TRAITOR AND SEND HIM TO PRISON FOR TREASON AND CONSPIRING AGAINST THE AMERICAN PUBLIC. HE IS ONLY INTERESTED IN MOVING OUR WEALTH AROUND THE WORLD FOR THE INTERNATIONAL BANKERS......WAKE UP !

[sjc_1]

"How about letting the businesses fail instead of "seize" them."

That is somewhat analogous to letting a building fall rather than take it apart.
There is a lot of damage a falling building can do to people and other structures. If you take it apart under controlled circumstances, you reduce the risk of damage and you can salvage some of the parts.

[whitemale08]

The U.S. Treasury Dept. should've been given this power along time ago when Wall Street Republicans and alot of dumb Democrats rubber stamped all of those M&As (merger and adquisitiions) during the last 25 years.

These fascists TOO BIG TO FAIL international conglemerates should've had the powers of GOVERNMENT SOVEREIGNTY to grow right along with them to regulate and be on standby to take these giant corporate looters into RECEIVERSHIP at moments notice.

[inketolstoy]

More, more, more. Our government keeps asking to be given more money, more power. And what have they done with it? Why should a guy who can't use Turbo tax be in charge of companies that have a massive influence on the economic health of our country? Why should a government that has looted trillions from social security be put in charge of our banks? Why should our president and congress, who haven't balanced a budget in decades be in charge of our economy? I guess because they keep taking, and we keep letting them.

[Serf_12]

How about letting the businesses fail instead of "seize" them.

[budmag06]

Communism is here and flourishing! Open your eyes people!

[danae71]

The Deep Web includes search networks like LexisNexis, Ebsco-host, all things that college and university librarys have. I am in University and have access to the library. Want to read something interesting, take a leap and read this:

http://www.freerepublic.com/focus/f-news/2131604/posts The Role of Congress in the Recession on 2008 http://www.freerepublic.com/focus/f-news/2198595/posts

Then read this:

http://canadafreepress.com/index.php/article/9454

If you are NOT outraged by the time you finish, then you must be benefiting from it.

[sjc_1]

Any company engaged in activity that can put the nation at risk is subject to evaluation. In this case it is financial and if the company will not cooperate for the good of the nation, more extreme measures must be taken.

[danae71]

Doublehappiness88 - Sorry love, I have access to more information that you do most likely. A lot more, google is insignificant compared to the deep web.

You have been had and are simply either too flat out stupid to see it, still buy into the Ideology of your Messiah, or you are in on the take.

Which is it?

The rest of America is NOT buying into your bs anymore. your PC whining and your protestations of Ignorance when the poo you threw hits the fan and flies back in your face.

Call me stupid if you like, but more than half the people reading what I write AGREE WITH ME. Take that concept into account, insult me and you insult every other person on this board that agrees with me. Digging your latrine just that much deeper. Next time might want to start from scratch and dig a new hole before trying to make the already full one deeper. It's a little cleaner that way.

[DoubleHappiness88]

To the drivil posted by danae71:
Even if you repeat that ridiculous statement until your last breath, it will still be completely wrong. If any school will have you, take an 8th grade government class. You are pitiable.

[far_point200]

Refering to the picture above......

"Sieg Heil Mein Fuerher!

I will crush ze capitalists mein fueher Obama, just give me ze power."

It begins again........

[danae71]

mbrew - You don't get it. Democrats in Congress MADE THE RULES THAT ALLOWED IT TO HAPPEN. DEMOCRATS IN CONGRESS ARE BENEFITING FROM WHAT THEY ARE DOING!!! Stop supporting Democrats, they are ripping YOU off blind as well! What You LIKE it??!?!?! What kind of kool-aide are you drinking? It has RAT POISON in it! Wake the hell up Liberals, you have been HAD.

[danae71]

OBAMA was in the senate since 2006 when Democrats took it over, he has been a BIG part of the efforts that brought together Porculus in that time (They know exactly what's in it! and did it all deliberately and with a great deal of attention to detail. Don't tell me they are ignorant of what they were/are doing! I am not buying that utter BS!)! All the Democrats were putting together pet project legislation to hit us with after they created their Crisis. Their crisis was the HOUSING crisis, and the banking Failures that FOLLOWED! Democrats did this to us! They used a crisis that Congress created, with the CRA and the on steroids follow-up legislation that went with it. I mean DAMN ACORN brags about forcing banks to use FOOD STAMPS, and UNEMPLOYMENT checks as income. You would think having a JOB might be a GOOD idea when buying a house? You THINK? They were HUGELY successful at it! in 1985 they had done it 21,000 times. Just imagine how many more they got over the following 30 years! CONGRESS CREATED ACORN'S ABILITY TO DO THIS!!!!!! And ACORN WORKS CLOSELY WITH CONGRESS GIVING THEIR CANDIDATES MONEY AND CAMPAIGN WORKERS. AND THE GOVERNMENT IN TURN GIVES ACORN BILLIONS OF DOLLARS!

Good LORD! Its OBVIOUS what is going on!