A power grab, but a necessary one
“Treasury Secretary Timothy F. Geithner today told Congress the administration will seek unprecedented power to seize non-bank financial companies whose collapse could jeopardize the economy, a move Geithner said would have allowed the government to bail out insurance giant American International Group at a far lower cost to taxpayers.
The government at present has the authority to seize only banks.
Allowing the Treasury Department to take over a broader range of companies, such as large insurers, investment firms and hedge funds, 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.
…. Rep. Barney Frank (D-Mass.) seemed inclined to support Geithner’s request, saying the government should have the same power over all financial services firms as the Federal Deposit Insurance Corporation does over banks.
“Banks also failed in 2008 . . . But the fact is that we have in place mechanisms . . . that contained the damage,” Frank said. ” . . . We need to give somebody, somewhere in the federal government. . . the power to do what the FDIC can do with banks.
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 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.
The authority to seize non-bank financial firms 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.
The powers would parallel the government’s existing authority over banks, which are exercised by banking regulatory agencies in conjunction with the FDIC. Geithner has cited that structure as the model for the government’s plans.”
I recognize that request fits neatly into the “ohmigod-Obama-is-trying-to-take-over-the-world” narrative favored by many of his critics. But if you look a little deeper the idea makes a lot of sense, and in fact is downright necessary.
The government already holds the power to take over troubled banks. Why? Because it also has the obligation to make good on the banks’ deposits should things go wrong, and because we learned the hard way that bank runs have the capability to bring down an entire economy.
Now we’ve learned — again the hard way — that AIG and other non-bank institutions also have gotten “too big to fail,” that government intervention is required if they do, and that their collapse would be enough to bring down the entire economy.
The power Geithner seeks should have checks and balances built into it — approval of two-thirds of the Federal Reserve Board is one such check. But its power that modern government needs.
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141 comments Add your comment
The REAL GodHatesTrash, Superstar
March 25th, 2009
5:28 pm
Let’s face it – only inbred morons think Reagan was a great President. He doesn’t even make it to mediocre.
Frederick Douglass
March 25th, 2009
5:29 pm
The Dow’s up 986 points since March 2nd, when’s that dead cat, from dead cat bounce fame, coming down?
Taxpayer
March 25th, 2009
5:35 pm
Right you are, Superstar.
Taxpayer
March 25th, 2009
5:41 pm
It’s simply amazing how easy it is to upset a conservative (Republican) — just let loose with a little truth about their ‘heroes’, especially Reagan or the little Bush (aka, Bush Junior or Dubya). Then again, it’s not exactly rocket science to misunderestimate their lack of control.
The Corporal
March 25th, 2009
5:47 pm
Taxpayer:
I repeat, that post regarding the spelling of the word “Tryanny/Tranny” was from “Corporal Punishment” (whoever he/she is) and not me.
But that brings up again the larger issue concerning the postings on these threads. Why is it that some of you have to constantly focus on the spelling of words, etc. instead of the debate? Anyone can to that, or make personal attacks or whatever.
It would be so nice if everyone would just stick to honest debate end nut wirry abaot the spelline of wurds.
If you wish to never have a debate with me again …. just say so and “so shall it be.”
I Report/ You Whine
March 25th, 2009
5:55 pm
Well, of course-
U.S. to blame for much of Mexico violence: Clinton, An “insatiable” appetite in the United States for illegal drugs is to blame for much of the violence ripping through Mexico, Bruno said on Wednesday.
So how y’all in HollyWeed feel about that?
Too stoned to care?
freaks
@@
March 25th, 2009
5:56 pm
Oops! I just corrected someone’s spelling over at Wooten’s.
Shame on me, but it was a great opportunity to play around with The “O”.
My husband is an excellent speller, he just has a small keyboard and robust phalanges.
I Report/ You Whine
March 25th, 2009
6:01 pm
Aahhh, yes, “global warming-”
In Montana, the Army National Guard dispatched two helicopters to help locate motorists stranded by a snowstorm in the southeastern part of the state.
The blowing snow cut visibility and piled in drifts as high as 4 feet in parts of Wyoming.
Chad Harris
March 25th, 2009
6:06 pm
The Fed couldn’t have screwed things up more. That’s the NY Fed and Bernanke’s fed. Geithner has 3 key personnel who also are keeping gigantic bonuses who came straight from Gs inoldman Sachs who received bailout money in quite another way from the money they are now “giving back.” They received billione s at 100 cents on the dollar from AIG who received it as a bailout bunch of billions from us.
The Getithner Goldman Sachsers have no intention of giving their large bonuses courtesy of
you.
Law and Order’s favorite DA now finds himself under investigation by the FEC:
“In this matter, the Office of General Counsel recommended the Commission find reason to believe Senator Fred Thompson, his committee, and treasurer, in his official capacity, violated 2 U.S.C. §§ 432(e)(1); 433(a), and 434 of the Federal Election Campaign Act of 1971, as amended (The Act), by improperly using the regulatory “testing the waters” exemption to the statutory requirement to register with the Commission.”
Go get ‘em Fred. A perp walk wouldn’t look great on your resume if you plan to be one of the dead men walking for the Wingnut Party in 2012.
Chad Harris
March 25th, 2009
6:07 pm
I bet he has a robust bunch of fingers. Spelling at wooten’s is moot–they are illiterate.
Dusty
March 25th, 2009
6:07 pm
Taxpayer,
Go ahead and mimic conservatives. You are definitely in need of new ideas.
Chad Harris
March 25th, 2009
6:08 pm
Snow in winter and spring in the west and north only has relevance to Global Warming if you’re a child.
Chad Harris
March 25th, 2009
6:14 pm
The Republican budget plan is located exactly where?
bugger
March 25th, 2009
6:14 pm
So now The president has power to sieze and take over all private finances in the country. How cool is that?
Taxpayer
March 25th, 2009
6:15 pm
Corporal,
I cannot recall ever having the first debate with you so what is all this “again” stuff that you are talking about.
ToTheHypocrits
March 25th, 2009
6:15 pm
Jay, you hoping Geithner bails out the AUC? May be the only way you keep your job.
@@
March 25th, 2009
6:17 pm
Oh, we know ChaddyWick. Where would we all be without your delusions of self-aggrandizement?
Taxpayer
March 25th, 2009
6:17 pm
Dusty,
Go ahead and mimic non-conservatives (non-Republicans). You are definitely not lacking in old ideas.
Chad Harris
March 25th, 2009
6:19 pm
Geithner’s boys and girls have been working with Goldman ($12 billion bailout) and Barkley’s ($9 billion) for weeks and won’t recommend anything without their approval.
@@
March 25th, 2009
6:21 pm
…and tell me, ChaddyWick
is it likely that you can count the number of people, who are impressed with you, on those worn down nubs of yours.
Zero!
Taxpayer
March 25th, 2009
6:21 pm
Chad,
The words ‘plan’ and ‘Republican’ cannot be used together in any meaningful and positive way for we the people. It would conflict with their “Just do nothing except say no” scheme for re-election and we do not want to interfere with that idea. That is their best idea ever…ever…ever, I say.
@@
March 25th, 2009
6:23 pm
I beg your pardon, ChaddyWick.
Have I ever admitted to you that I even wear panties, O Unknowing One.
Ecomonist
March 25th, 2009
6:25 pm
sounds a bit too communistic to me. I am all for the Laissez-faire capitalism. The the strong survive and the weak fail.
Taxpayer
March 25th, 2009
6:26 pm
Wow! This mimicking a conservative (Republican) is even easier than I thought it would be. There’s absolutely no thought process required. Just dump. How’s this. Republicans suck. Wow! It just gets easier with each post. No wonder they do it so much. There’s no research or analysis or anything. It’s even easier than what Andie does with his AmSpec cut-n-pastes.
Dusty
March 25th, 2009
6:27 pm
Chaddy,
are you trying to tell us that Geithner has associates who took huge amounts of taxpayer money and now Dems can’t decide if they should regulate such people as that?
Don’t worry. Obama will “understand” and over look such minor details. He’s got to keep SOMEBODY in that department besides Geithner.
Fred Thompson? Who? Nice guy but forgotten. You will have to find someone else on which to drool your dribble about future elections. I hear there’s a fine military man who might be interested and you can bet your bottom dollar he is not a Democrat.
By next big election time, Democrats will be going to Disney Land to see if they can get Mickey Mouse to run. That will be your best choice from the few willing to run after the current Dem dumpster doings. Who could blame them?
Dusty
March 25th, 2009
6:30 pm
Attaboy, Taxpayer. That was almost a new idea. Sitting here all day every day must get dull. Certainly sounds like it.
Taxpayer
March 25th, 2009
6:33 pm
Attaboy, Dusty. That was more of the same. Sitting there all day every day must be exciting. Certainly doesn’t sound like it though.
DB, Gwinnettian
March 25th, 2009
6:36 pm
Ok, so I’ve seen the WaPo charts that RW linked @ 4.47.
Anyone still hanging around this thread talking economy, I’ve a question: how different would those charts look under a McCain/Palin administration?
Jay
March 25th, 2009
6:40 pm
OK, Commie, Chad and Trash are now banned.
All are repeat offenders, to say the least. I’ll decide tomorrow whether it’s permanent.
It’s pretty simple, folks. Discuss the topic; discuss the weather. But don’t attack each other personally.
Mrs. Godzilla
March 25th, 2009
6:51 pm
I don’t understand the opposition to the Government having the power to
prevent a major financial entity from taking down the American economy.
We can talk terms, but this kind of thing must never happen again.
I Report/ You Whine
March 25th, 2009
6:52 pm
It’s raining here.
bill mack
March 25th, 2009
6:57 pm
This is serious. Obama is a Marxist and he’s doing his best to take the US down.
RW-(the original)
March 25th, 2009
7:11 pm
DB,
I think those charts would look far different under a McCain/Palin administration. I think the Porkulous bill would have been in the same ballpark, but the pork laden Omnibus bill would have been the start of the chopping and I see no way they would be proposing a 3.6 trillion dollar budget for next year.
Jay B.,
If you’re going to ban people at all you may as well make it permanent once they’ve reached whatever threshold you use for that sort of thing. As much as it may look like it at time this isn’t a kindergarten class and timeouts aren’t going to work.
@@
March 25th, 2009
7:20 pm
For the most part, I ignore ChaddyWick. The minute I begin to read his first post, it’s obvious he’s just spoiling for a fight. Before anybody mentions his name, it’s SLAM….BAM….HERE I AM! WHO WANTS A PIECE OF ME?
In the interest of his mental health, he may need to be locked up….or out.
The Corporal
March 25th, 2009
7:38 pm
Whatever you say ……… but in the future try to read the “handle” correctly and at least direct your remarks to the right person.
DB, Gwinnettian
March 25th, 2009
8:02 pm
RW, just my .02, but I think you’d need a lot more cutting than McCain would be capable of pulling off to change those charts much.
Of course you and I have a fundamental disagreement about what kind of spending is needed; I think we need to rebuild the infrastructure and phase out our reliance on a for-profit health insurance system for working americans, replacing it with a single-payer.
Compounding this is a horrible, horrible hit we’ve taken with the banking/pretend-banking investment community building up a big crap-pile, of course. but the problems in the previous paragraph would be here, crap-pile or no crap-pile.
Dave R
March 25th, 2009
8:19 pm
Mrs. G, the opposition to taking over these failed institutions by the government is that if one person gets a bailout, everybody else will get a bailout, and then NO ONE, from the people who run them to the people who don’t do their homework before throwing their money at them, will ever learn the lesson that they shouldn’t do that again.
You can’t and shouldn’t be protected from failure, and it is certainly not the government’s role in which to do the protecting.
Life’s tough – get a helmet.
Not a government.
Dave R
March 25th, 2009
8:21 pm
Jay, I vote Chad to be permanent.
If you’re asking for input . . .
Oh, and consider banning Taxpayer as well. I know he’s not on your list but posting other people’s writings doesn’t a good blogger make.
vlscpa
March 25th, 2009
9:26 pm
It’s working WAY better than Charles Manson’s plan, for Helter Skelter, and I think that chaos is what they want. We’re heading to Walker Percy’s LOVE IN THE RUINS.
RGB
March 25th, 2009
9:37 pm
People with shallow intellectual capability always reach out to something that affected Bush’s life a few decades ago–but has not since he became born again. But that, too, is a problem for the statists. We just can’t have a power greater than government.
Know two things. First, Obama will add more indebtedness to our country in the next 10 years than the cumulative total of all presidents–from Washington to G.W. Bush. Second, if Obama were to actually pay for his proposed 2010 budget, he would have to tax 100% of the earnings of every citizen making $75,000 or more. That’s right, 100%. Though Bush and the Republicans overspent, they look positively thrifty compared to Obama and Both Democrat Houses of Congress.
If you think there’s any good news in any of this, there isn’t. It will not only affect you and me but our children, grandchildren, and their children as well. Our collective standards of living just took a nosedive from which we will never recover. The loss of freedom is frightening since government growth usurps freedom.
Margaret Thatcher said it aptly when she stated that the problem with socialism is that eventually you run out of other people’s money to spend.
It is ironic that the very presidential candidate this storied newspaper endorsed will be contributory to its continued decline. The dreadful business economy being continued by Obama and the Democrat Congress will be significantly contributory to a declining advertising environment. Tonight there are 90 more people “benefiting” from Mr. Obama’s plan.
May God save the United States of America.
MikeH
March 25th, 2009
9:46 pm
Ok… at what point does it become apparent enough that the government’s answer to everything lately is to have it’s hand in everything, or to make a mechanism available to do so? And at what point does the nagging thought kick in that the government has one legal means of imposing it’s will on the private lives and operations of those with whom it is a “partner” with, but which that same “partner” does not have; that being military and police force?
Come on folks… wise up. In the short time this country has existed it has become THE nation of choice for so many because THE PEOPLE have been driven to do, make and be the best. We have constructed a way of life and a lifestyle that is sought after, and emulated, and has spread to other countries. People DIE TRYING TO GET HERE.
All this done despite repeated attempts by some to use governing power to become the great equalizer in the name of “protecting us from ourselves”.
History proves that this extent of governmental intervention is indicative of societies that set the bar to the lowest common denominator. (We made it through the depression era despite the admitted post-fact shortfall of the government’s initiatives).
Why can’t we STOP SELLING OURSELVES SHORT and get our lips off the asses of public officials that either can’t or don’t hold private jobs and seek their living and glory through means of governing others !??!