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10-31-2009 06:04 AM |
Proposal may avert bailouts
A new law to stem failure
Quote:
Proposal may avert bailouts
Anne Flaherty, The Associated Press
10/29/2009
Treasury Secretary Timothy Geithner said Thursday that giving the government the power to dismantle mammoth financial firms will prevent future bailouts.
He refuted claims that the proposal would create a category of firms deemed so big that they wouldn't be allowed to fail.
"The only authority we would have would be to manage their failure," Geithner told the House Financial Services Committee.
The Obama administration and Rep. Barney Frank, the panel's chairman, want legislation that would enable federal regulators to identify and monitor big financial firms and step in to wind them down before they collapse.
Regulators have a similar authority with traditional banks but were powerless last year when Lehman Brothers and insurance giant American International Group teetered on the brink of collapse.
Frank, D-Mass., and Geithner said the proposal would keep the government from having to decide between doing nothing and a costly rescue.
"Without the ability for the government to step in, manage the failure of a large firm and contain the risk of a fire spreading, we are resigned to repeat the experience of last fall," Geithner said
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