Secretary Geithner says AIG situation underscores need
WASHINGTON – Treasury Secretary Timothy Geithner called Tuesday for new powers to regulate giant nonbank financial companies, such as insurance titan American International Group, whose failure would endanger the U.S. economy.
In a rare joint appearance before the House Financial Services Committee, Geithner and Federal Reserve Chairman Ben Bernanke said the AIG experience underscored that the Treasury needed to be able to take over failing financial institutions expeditiously, remove their bad assets and sell their good assets to competitors. The powers that Geithner seeks are similar to what the Federal Deposit Insurance Corp. has over national banks.
“The proposed resolution authority would allow the government to provide financial assistance to make loans to an institution, purchase its obligations or assets, assume or guarantee its liabilities and purchase an equity interest,” Geithner said. “This proposed legislation would fill a significant void in the current financial-services regulatory structure with respect to nonbank institutions.”
Geithner said “AIG highlights broad failures of our financial system” and that it underscores why action must be taken to ensure that such dangers never menace the nation again.
The Obama administration will lay out more details of its proposed revisions for financial regulation Thursday.
House Financial Services Committee Chairman Barney Frank, D-Mass., appeared supportive of the administration’s call.
“We need to give somebody somewhere in the federal government … the authority to do what the FDIC can do with banks,” Frank said. “It’s called resolving authority, but giving somebody … a form of bankruptcy power given under the Constitution … allows us to avoid the choice of all or nothing: Nothing in the case of Lehman Brothers, all in the case of AIG.”
Lawmakers grilled the two senior officials anew about the $165 million in bonuses paid to AIG employees. Geithner and Bernanke restated their displeasure over AIG’s retention bonuses and vowed to work with Congress to prevent excessive bonuses or rewards going to the employees of firms that receive federal bailout money.
Bernanke testified Tuesday that he had considered suing to block the AIG bonuses but his legal counsel persuaded him not to. Bernanke said that if the Treasury had the power it now sought, “the bonus issue would not have arisen.”
However, while Geithner said he found the bonuses repugnant, he said that there was no choice but to pay them because they were part of legally binding contracts.
Last week the House of Representatives rammed through legislation to levy a 90 percent tax on bonuses to employees with household incomes that exceed $250,000 a year at companies that receive at least $5 billion in federal assistance.
After financial industry executives began warning that such punitive terms may make them reluctant to cooperate with federal efforts to end the financial crisis, and after legal authorities warned that the legislation probably is unconstitutional, reservations began to emerge.
The Senate is postponing debate on its own bill aimed at reclaiming the bonuses through taxes, a delay intended to let passions die down and reason prevail.
2:27 p.m. Trespassing -- Officer asks 911 dispatch if male named Logan trespassed from Hayden Super 1. 2:20 p.m. Arrests -- Adult female & 2 boys en route to jail, ...
Catcher Seth Spivey, third baseman Xavier Turner, right-handed pitcher Tyler Ferguson and outfielder Chad Smith were named Northwest League All-Stars on Tuesday, the league announced in a press release.
I don't claim to have done a scientific survey. But in overhearing several people on the phone telling others how to navigate downtown, it seems that might be impossible to ...
FISHING -- Game On! for sockeye and chinook anglers on the upper Columbia River near Brewster. Apparently the Okanogan River has finally warmed up enough to form a thermal barrier ...
sponsored According to two 2015 surveys, 62 percent of Americans do not have enough savings to handle an unexpected emergency, much less any long-term plans.