Finance bill gives US broader bank powers
Measure would shift bailout cost to large firms
WASHINGTON - The Obama administration and the head of an important House committee unveiled legislation yesterday to give the government broad new powers to shift the cost of rescues of big, troubled financial institutions from taxpayers to other large companies.
The legislation, drafted jointly by Treasury officials and Representative Barney Frank, the Massachusetts Democrat who heads of the House Financial Services Committee, would create a special fund, paid by assessments on financial companies with more than $10 billion in assets, to bear the costs of big firms that fail.
A statement by the committee said that the legislation followed a “polluter-pays model where the financial industry has to pay for its mistakes - not taxpayers.’’
The measure, directed at institutions whose troubles might pose risks to the financial system, would create a powerful financial services oversight council, led by the Treasury secretary, to set policy and tougher regulations for the largest companies and mediate disputes between federal agencies. It would also give the Federal Reserve Board a lead role in directly supervising many of the largest financial conglomerates. .
The legislation would permit the government to impose tough new capital requirements on the largest companies as well as take them over, making their shares virtually worthless, and remove management when they fail. It would also provide new authority for the FDIC, which seizes weak commercial banks, to take over other large financial institutions like insurance companies or hedge funds, when they run into trouble.
