Administration to Send Legislation to Congress to Authorize Large Bank Seizures
At the moment, the federal government has clear authority to seize a standard depository bank. But it’s not at all clear that such authority extends to the far-flung enterprises of the modern financial services conglomerate. And that, of course, has been an impediment to a Swedish-style solution for the problems of today’s large banks. But Binyamin Applebaum and David Cho report for The Washington Post that that’s about to change:
Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.
The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.
This—a time when the banks are very happy with the administration—is a good time to do this and lay the procedural groundwork for stronger measures. Now we’ll see if congress is ready to pass anything along these lines. Thus far, I feel like folks on the Hill have been more interested in complaining about this and that than in picking a preferred solution.
26 Responses to “Administration to Send Legislation to Congress to Authorize Large Bank Seizures”
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March 24th, 2009 at 12:33 pm
I wonder what the Obama administration has up its sleeve. I hope its better than what we are seeing now.
March 24th, 2009 at 12:33 pm
hilarious headline, yo.
March 24th, 2009 at 12:40 pm
Obama, tougher than the Steelers.
March 24th, 2009 at 12:48 pm
If the Obama administration intended to seize, or even possibly seize, the big banks that couldn’t pass a stress test, how would they be behaving?
In a threatening manner, or a reassuring one?
Maybe more than one of the biggies – say, Citi and BoA – needed to be put out of their misery. They’d have to do them both at the same time, since the management of the remaining bank would just go on a looting spree if they saw the government nationalize the other for being in the same condition.
We’re talking about a very big, complicated job. Getting Treasury into a condition to pull such an action off – staffing up, preparing plans – would be like getting every duck in Minnesota in a row. That’s going to take a very long time.
So, if such a thing was being planned, how do you think the administration and Treasury would be behaving during the run-up?
March 24th, 2009 at 12:48 pm
I suppose that’s one reason nationalisation was “not on the table”. It would have been bad had the president announced, “We believe we need to nationalize several large banks, but we can’t, so we’re screwed … moreso.”
March 24th, 2009 at 12:53 pm
They make the students write papers at Harvard, right? And they grade them, right? Just checking.
March 24th, 2009 at 12:56 pm
So, if such a thing was being planned, how do you think the administration and Treasury would be behaving during the run-up?
But you can second- and third-guess that, since the markets presumably know that whistling and looking unconcerned might also signal the intention to go in for the kill on a Friday night.
March 24th, 2009 at 1:08 pm
Given the lack of any mention of a special resolution regime, or intent to develop one, the point of this bill is NOT, appearances to the contrary, to be able to put more firms into receivership. It is to get broader authority to bail them out. Yves Smith at nakedcapitalism
March 24th, 2009 at 1:13 pm
Stories like this are why a bulk of Americans don’t understand how legislation works. The President doesn’t initiate legislation.
March 24th, 2009 at 1:18 pm
The President doesn’t initiate legislation.
Right. Lobbyists do. The President is just a kind of powerful lobbyist.
March 24th, 2009 at 1:47 pm
I’m not overly-impressed with the markets’ predictive abilities right now.
March 24th, 2009 at 2:37 pm
joe from lowell – perhaps how they’ve been behaving.
FDIC is staffing up left and right. If you’ve got a CPA or a background in banking and need a job, send a resume to your closest FDIC office – check their website, they’re opening new offices all over.
FDIC is also contracting consulting and audit firms which have excess capacity and/or banking expertise all over the country.
So, seeing as how a seizure of a big bank or 3 would probably require FDIC expertise, I’d imagine they’re acting just how one would expect them to act. All these bailouts are just to buy time for the big play.
Take a look at FDIC’s Careers website:
https://jobs1.quickhire.com/scripts/fdic.exe/runuserinfo?Haveusedbefore=5#Public
You don’t have that many openings unless you’re staffing up for something BIG.
March 24th, 2009 at 2:59 pm
I’m hope this means Obama is sending a warning to the big banksters – stop fucking around or else. But then I look at Obama’s campaign donor list…..
March 24th, 2009 at 9:54 pm
bperk says:
The President doesn’t initiate legislation.
Of course the White House can initiate legislation! Even bperk can initiate legislation. You just write it up and send it to your friendly congressional representative, who may introduce it, and pass it off as their own. Like this:
http://www.senate.gov/reference/resources/pdf/legprocessflowchart.pdf
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March 25th, 2009 at 4:06 pm
They should seize one BIG PRIVATE BANK…the Federal Reserve!
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