White House to Seek Power to Seize Non-Bank Financial Companies
Binyamin Appelbaum and David Cho - The Washington Post
The Obama administration plans to send legislation to Congress this week granting the government new powers to seize troubled non-bank financial companies whose collapse would threaten the broader economy, according to three sources familiar with the matter.
Protesters gather outside the A.I.G. building in Los Angeles. (Photo: Reuters Pictures)
Treasury Secretary Timothy F. Geithner is expected to argue for the new powers at a hearing on Capitol Hill tomorrow about the furor over bonuses paid to executives at American International Group, which the government has propped up with $170 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.
"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 at a forum held by the Wall Street Journal this evening.
The administration wants new powers to oversee firms such as AIG, which it judges to be important for the overall financial system, and to take control of those institutions if they fall into trouble.
The proposal would significantly expand the scope of the government's regulation of the financial industry. The government's power over banks is considerable, but there is little legal authority over other kinds of companies, an absence of power that also played a role in the collapse of the investment bank Lehman Brothers last year.