Treasury Asking for Authority to Seize Companies (Washington Post)

[CulpeperMM]

Geithner to Ask Congress for Broad Power to Seize Firms Goal Is to Limit Risk to Broader Economy

By Binyamin Appelbaum, David Cho and Debbi Wilgoren Washington Post Staff Writers Tuesday, March 24, 2009; 7:44 AM



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.

[ATF Consumer]

That is in direct conflict with capitalism

I guess they are just getting everything setup, so that once China decides to take over our country, everything will already be in place.

[CulpeperMM]

Originally Posted by ATF Consumer

That is in direct conflict with capitalism

more evidence of the war on Americans perpetrated by our government.

[Hoosier8]

Mark Levin states that he believes the Obama administrations ultimate aim is to nationalize banks and that Geithner's plans are designed to fail so Obama can step in and take over. This would be a necessary step towards that.

How would Geithner's plans fail? When the administration wants to team with private industry to tackle the bad debt, then punishes anyone that actually makes a profit from it, there will be few takers.

[bigg cheese]

The government is asserting unbridled authority and it needs to be checked. It makes me wish that our conservative Supreme Court judges could take a page from the lib playbook and legislate from the bench to go, "Hey, Morons! You DO realize this doesn't work with the constitution right?" rather than waiting for a case to come to court. the AIG execs are crumbling under unconstitutional pressure. Who can blame'em? Who wants ot be a test case for anything so large?

But then we're just as bad as they are.

I'm not a conspiracy theorist, but I do have some deeply seated religious beliefs about what's to come, and I can see this being used as a tool to remove us as a world power and out of the limelight we've enjoyed for so long.

[Liberty's Teeth]

"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,"
Yeah. Because the government has proven themselves to be able to run any entity that they get their grubby hands on at a profit.

Stock up people. It's Germany 1934 all over again.

[dburkhead]

My letter sent to Bayh, Lugar, and Carson:

In Today's Washington Post, there is an article claiming Geither to ask Congress for broad power to seize firms.

I am utterly and completely opposed to this. It is completely contrary to the founding principles of this nation even leaving aside that the government has not demonstrated any better capability of running such firms than the private sector.

I implore you to vote against any such request and to use every means in your power to encourage others to do so as well.

[jmiller676]

ahhh CRAP! It was only a matter of time.

[fire1035]

damn it

[jeremy]

I despise bankers, lawyers, and politicians...