Financial Crisis News Center

Rep. Bachus: Time to End the Bailouts

This story appeared in Bank Digest.

During consideration of bailout authority legislation, House Financial Services Committee Ranking Member Spencer Bachus, R-Ala., stated, “The Committee Print of the ‘Financial Stability Improvement Act’ grants unprecedented authorities to the executive branch to expand the government's ‘too big to fail’ policies of the past few years. Regardless of the nomenclature used to camouflage this fact, the provisions of this proposed legislation will give the government practically unlimited power to continue to pour taxpayers’ money into failed businesses whose misguided schemes devastated our economy last year. This cannot continue. It is time, once and for all, to end the bailouts.”

Issa Questions Back-Door Bailout

This story appeared in Bank Digest.

House Committee on Oversight and Government Reform Ranking Member Darrell Issa, RCalif., sent letters today to the Federal Reserve Bank of New York (FRBNY) and American International Group, Inc.(AIG) requesting “all records and communications referring or relating to the FRBNY’s negotiations with AIG’s credit default swaps counterparties that resulted in $13 billion of debt put on the backs of the American taxpayers.” Issa added “Behind closed doors and with no approval from Congress, the FRBNY may have added an additional $13 billion of debt on the backs of taxpayers. These allegations, if true, amount to nothing less than a backdoor bailout of AIG’s creditors.”

Issa Letter  ; FRBNY Letter ; AIG Letter

Geithner Defends Resolution Authority Plan; Bair Raises Objections

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Proposed new authority that would allow the government to step in and resolve large, failing financial institutions would not result in a category of firms deemed too big to fail, Treasury Secretary Tim Geithner assured Congress on Oct. 29, 2009. Geithner told the House Financial Services Committee that the proposed legislation, announced a day earlier by the Treasury Department and the committee, would mean that if systemically important firms got themselves in the position where they could not survive on their own, “then the only authority we would have is to manage their failure.” Committee Chairman Barney Frank, D-Mass., said he hoped to mark up the legislation next week.

Bernanke Sees “Critical” Need for Congress to Close Regulatory Gaps

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Federal Reserve Board Chairman Ben Bernanke said it remains “critical” for Congress to close regulatory gaps and provide supervisors with additional tools for anticipating and managing systemic risks.

Speaking October 23 at a Federal Reserve Bank of Boston conference Bernanke said Congress must ensure that all systemically important firms, including those that do not own a bank, are subject to a robust regime for consolidated prudential supervision. Tougher capital, liquidity and risk-management requirements for such firms are also needed not only to protect the stability of the financial system, but to reduce their incentive to grow large in order to be perceived as too big to fail, Bernanke said.

Tarullo Discusses Systemic Risk

By Serena Lynn, Editor, the CCH Federal Banking Law Reporter and Bank Digest.

Fed Governor Daniel K. Tarullo, speaking at the Exchequer Club, in Washington, D.C., said “the reform process cannot be judged a success unless it substantially reduces systemic risk generally and, in particular, the too-big-to-fail problem.” Tarullo noted that, as shown by government intervention when Bear Stearns, AIG, Fannie Mae and Freddie Mac were failing and by the repercussions from the bankruptcy of Lehman Brothers, “the universe of financial firms that appeared too big to fail by 2008 included more than the insured depository institutions subject to prudential regulatory requirements.”

Towns, Kucinich to Hold Fourth Bank of America—Merrill Lynch Hearing

This story appeared in Bank Digest.

House Oversight and Government Reform Committee Chairman Edolphus Towns, D-N.Y., and Domestic Policy Subcommittee Chairman Dennis Kucinich, D-Ohio, announced last week that the Committee will continue its investigation into the Bank of America—Merrill Lynch merger on Thursday, Oct. 22, 2009, with a hearing entitled “Bank of America and Merrill Lynch: How Did a Private Deal Turn Into a Federal Bailout? Part IV.”

http://oversight.house.gov/story.asp?ID=2641

Treasury Did Not Understand AIG's Complex Pay Structure: SIGTARP

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

In a report released on Oct. 13, 2009, Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofsky wrote that the Treasury Department did not understand AIG's “staggeringly complex” pay structures when it gave the firm billions of dollars in aid last fall. The government has committed a total of more than $180 billion to wind down the New York-based insurance and financial services conglomerate, and now owns about 80 percent of the company.

Chairman Towns' Statement on Bank of America Decision Regarding Documents

This story appeared in Bank Digest.

Government Reform Committee Chairman Edolphus Towns, D-N.Y. released a statement on Bank of America's decision regarding documents related to the Committee's investigation of the Bank of America-Merrill Lynch merger.

Towns Comments on Ken Lewis' Retirement

This story appeared in Bank Digest.

Oversight and Government Reform Committee Chairman Edolphus Towns, D-N.Y., made the following statement regarding the retirement of Bank of America CEO Kenneth Lewis, “Our investigation has uncovered troubling facts about Bank of America's acquisition of Merrill Lynch, and Mr. Lewis was at the center of this controversy. We hope that Bank of America's new leadership will quickly repay American taxpayers and help us finally resolve unanswered questioned about this merger.”

Treasury Says Concern Over Bank Failures Will Factor Into TARP Decision

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Sept. 25, 2009.

The Treasury Department is “seriously concerned” about bank failures, and will take the issue into account when considering whether or not to extend the Troubled Asset Relief Program (TARP) into next year, Assistant Secretary for Financial Stability Herbert Allison Jr. told Congress September 24.

“This is one of many factors that the secretary will have to consider as he makes his determination. We’re seriously concerned about bank failures, and we want to make sure that banks have adequate capital,” Allison said during questioning from Senate Banking, Housing and Urban Affairs Committee Chairman Chris Dodd, D-Conn.