House Bill Would Charge Biggest Firms for Resolution
Oct. 27 (Bloomberg) -- A U.S. House committee is callingfor financial firms with more than $10 billion in assets to paythe costs after the government takes over companies deemed toobig to fail, according to draft legislation released today.
The House Financial Services Committee measure lays outrules for dealing with institutions whose collapse would poserisks to the financial system. The bill is a compromise workedout by the Treasury Department and the panel’s Democraticchairman, Barney Frank of Massachusetts.
The legislation “is a tough and sound response to too bigto fail,” said Michael Barr, an assistant Treasury secretarywho has helped spearhead the Obama administration’s work tooverhaul Wall Street rules. “It spells out the harshconsequences of failure while preserving the government’sability to prevent a financial meltdown.”
The draft legislation would shift the costs to rescue andunwind the biggest financial firms away from the $700 billiontaxpayer-funded bailout passed last year after the U.S. rescuedBear Stearns Cos. and American International Group Inc. TreasurySecretary Timothy Geithner is scheduled to testify to thecommittee Oct. 29 and endorse the plan.
Companies including insurers and hedge funds, not justbanks, would be tapped to pay for resolutions, Frank said todayin Washington. “The purpose is to go to other institutions aswell because they would get the benefits,” Frank said.
Frank said the legislation’s $10 billion threshold wouldspare smaller community banks.
Tier 1
Under the bill, the Federal Reserve would oversee thebiggest financial companies, known as Tier 1, and would hold themost power on a new council of regulators, officials said. Themeasure gives each major market regulator a seat on the counciland some authority for monitoring systemic risk.
The council will “identify financial companies andfinancial activities that pose a threat to financial stability,and will subject those companies and activities to heightenedprudential oversight, standards and regulation,” Frank’scommittee said in a statement.
The legislation gives the Federal Deposit Insurance Corp.power to resolve financial holding companies.
The FDIC would use a new line of credit from the Treasury so it could fund any takedowns. The money would then be paidback by an assessment on “any financial company” with at least$10 billion under management.
Separately today, the Financial Services Committee approvedby a 67-1 vote a bill that will require hedge funds to registerwith the Securities and Exchange Commission, subjecting theprivate investment pools to required federal oversight for thefirst time. The Obama administration had proposed such a step.
To contact the reporters on this story:Robert Schmidt in Washington at rschmidt5@bloomberg.net;Rebecca Christie in Washington at rchristie4@bloomberg.net
Last Updated: October 27, 2009 18:12 EDTSource: Bloomberg
« Back to Business News
Related News
-
Lehman Monday Morning Lesson Lost With Obama Regulator-in-Chief Oct 27, 2009 @ 04:49 PM
Sept. 11 (Bloomberg) -- Less than 24 hours after hisswearing-in ceremony, U.S. Treasury Secretary Timothy F.Geithner surprised Camden R. Fine with an invitation to a one-on-one meeting about the financial crisis.
-
House Bill Said to Call for Biggest Firms to Pay Resolution Tab Oct 27, 2009 @ 04:49 PM
Oct. 27 (Bloomberg) -- A U.S. House committee will call forfinancial firms with more than $10 billion in assets to pay thecost after the government takes over companies deemed too big tofail, officials briefed on the matter said.
-
Bill in works to let US dissolve failing firms Oct 27, 2009 @ 04:49 PM
House Democrats and the Obama administration are preparing to introduce major legislation aimed at eliminating the devil's choice the government faced last fall, when officials felt forced to decide between spending billions of dollars to rescue some of the nation's most powerful financial firms or letting their failures sink the economy.
-
Bernanke Says Add Consumer Protection to Fed Mandate Oct 27, 2009 @ 04:49 PM
July 22 (Bloomberg) -- Federal Reserve Chairman Ben S.Bernanke said consumer protection should be added to the FederalReserve Act as a formal policy goal along with low inflation andfull employment, showing a willingness to work with Congress andreshape laws that govern the central bank.
-
Fed Faces Biggest Blow to Independence, Powers in Dodd Proposal Oct 27, 2009 @ 04:49 PM
Nov. 11 (Bloomberg) -- The Federal Reserve faces thebiggest blows to its authority and independence in five decadesunder legislation championed by its lead overseer in the U.S.Senate.
