The treasury secretary and chairman of the House Finance Services Committee have unveiled a bill being referred to as the bailout of 2008 “on steroids”, Adrianne Appel at Inter Press Services (IPS).
by Adrianne Appel
30 Oct 09 | IPS
Big banks will not be forced to downsize and the public will be the last to know when they fail, a controversial bill unveiled by U.S. Treasury Secretary Timothy Geithner and Congressman Barney Frank proposes.
The long-awaited “too big to fail” legislation was roundly criticised during a congressional hearing Thursday as a nod to the biggest financial firms in the U.S.
“This is TARP on steroids,” said Rep. Brad Sherman, a Democrat, referring to the U.S. Treasury programme that gave trillions to financial companies.
The legislation was called for by Congress and President Barack Obama in the wake of the trillions recently spent by the U.S. government to rescue behemoth financial institutions like A.I.G. and Bank of America, out of fear that their failure would bring down the whole financial system.
“Taxpayers simply must not be put in the position of paying for losses incurred by private institutions,” Obama said in a letter to Frank this week praising the legislation. “When major financial firms fail, government must have the ability to dissolve them in an orderly way, with losses absorbed by equity holders and creditors.”
Leading up to the bill, many economists on the left and the right said the only way to protect the finance system and consumers is to break up the gargantuan finance companies that now exist. Former Federal Reserve chairmen Paul Volker and Alan Greenspan, and former labour secretary Robert Reich all favour this approach.
As a result of the mergers and acquisitions during the past 18 months, Bank of America, CitiGroup and J.P. Morgan Chase now control about one-third of U.S. finance and bank business, analysts say.