Thursday, May 7, 2009

Government wants more power

The FDIC's Sheila Bair wants to use the "too big to fail" excuse to expand the government's control over banks:

“Part of the problem is nobody really has a mandate for the whole system right now,” she said.

. . .

Ms. Bair also said that Congress should create incentives to shrink the size of the nation’s too-big-to-fail institutions, perhaps by demanding that they set aside far greater capital reserves or contribute more money to insurance programs that would help in closing them if they stumbled again.

. . .

She advocated giving the F.D.I.C., or some other entity, the legal authority to quickly manage the closing and resolution of “systemically important institutions” — in addition to giving the F.D.I.C. the power to shut down bank holding companies — just as it now has with individual troubled banks.
And of course, politicians will decide who is too "systemically important" and who isn't.

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