Geithner grilled over regulatory plan
Treasury Secretary Timothy Geithner was on the hot seat on Capitol Hill today over a plan to give regulators new powers to take over large financial institutions that run into trouble. John Dimsdale reports.
U.S. Treasury Secretary Timothy Geithner arrives for a hearing of the House Financial Services Committee on Capitol Hill -- October 29, 2009 (Brendan Smialowski/Getty Images)
TEXT OF STORY
Kai Ryssdal: Treasury Secretary Timothy Geithner took a trip up to Capitol Hill for some testimony this morning. New regulations for the financial sector were on the agenda. Specifically a plan to give regulators hefty new powers to take over large financial institutions that run into trouble. And take 'em apart if they had to. The secretary got the same treatment from lawmakers on both sides of the aisle. Rough. Our Washington bureau chief John Dimsdale reports.
JOHN DIMSDALE: The bill gives a council of regulators the power to seize and sell-off the assets of a broad range of financial institutions deemed too big to fail. If the takeover creates losses, regulators would slap fees on other big financial firms. The idea is to shield taxpayers.
Even traditional Democratic supporters of the administration criticized the bill, like California's Brad Sherman.
BRAD SHERMAN: This is the most unprecedented transfer of power to the executive branch to make decisions about both spending and taxes, in history. All without congressional approval and a sharp departure from our constitutional values.
Secretary Geithner said the proposal is based on the authority the Federal Deposit Insurance Corporation already has to tap an insurance fund to cover bankruptcies of smaller banks. Over the questioning of Republican committee member Spencer Bachus, Geithner insisted he's not asking for too much government power.
TIMOTHY GEITHNER: Without the ability for the government to step in and manage the failure of a large firm and contain the risk of the fire spreading, we will be consigned to repeat the experience of last fall. It's a really stark, simple thing.
And FDIC chairman Sheila Bair said the assessments on large financial institutions would hold investors and managers accountable.
SHEILA BAIR: The primary benefit of that is the strong signal it sends to the market. These are the rules, you will take losses if you fund or invest in high-risk-taking institutions. Forget too big to fail. These institutions are gonna be closed, and you will take losses.
Financial Services Committee Chairman Barney Frank said he'll bring the proposal up for a committee vote next week.
In Washington, I'm John Dimsdale for Marketplace.
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From Medina, OH, 10/30/2009
@gb gb: To be fair (and this is not an endorsement), I believe that this is what Michael Moore's film "Capitalism: A Love Story" was about. Politicians are largely about synergistic self-interest.
10/29/2009
When govt put money AIG, it was supposed to be for smooth diamantling of AIG. How is that going on? Looks like govt just back tracked and is helping out the AIG executives. How come no reporter or congressman brought up that. If they cant do with AIG, who can you trust govt on their words about his new promise.
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