WASHINGTON — A bill to be introduced in Congress by a key ally of
President Barack Obama would make it easier for the US government to
seize control of troubled financial institutions that are considered
too big to be allowed to fail, The New York Times reported.
a senior administration official, the newspaper said the measure would
be proposed this week by Representative Barney Frank, chairman of the
House Financial Services Committee, after extensive consultations with
Treasury Department officials.
The legislation would make it
easier for the government to throw out the financial company's
management, wipe out the shareholders and change the terms of existing
loans held by the institution, the report said.
Secretary Timothy Geithner was planning to endorse the changes in
testimony before the House Financial Services Committee on Thursday,
the paper noted.
The White House plan as outlined so far would
make the existence of a large financial company whose failure would put
the US financial system and the economy at risk much costlier, the
It would force such institutions to hold more money
in reserve and make it harder for them to borrow too heavily against
their assets, The Times said.
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Setting up the equivalent of living
wills for corporations, the plan would also require that companies come
up with their own procedure to be disentangled in the event of a
crisis, the paper said.
This plan, according to administration officials, ought to be made public in advance, said The Times.
changes will impose market discipline on the largest and most
interconnected companies," the paper quotes Michael Barr, assistant
treasury secretary for financial institutions, as saying.
the biggest changes the plan would make, he said, is that instead of
being controlled by creditors, the process will be controlled by the
Some regulators and economists in recent weeks have
suggested that the administration?s plan does not go far enough, The
Times noted. They say that the government should consider breaking up
the biggest banks and investment firms long before they fail, or at
least impose strict limits on their trading activities -- steps that
the administration continues to reject.