Geithner Seeks Power to Seize Imperiled Firms

In other words, the government wants to nationalize businesses that have taken bailout funds and if, in their opinion, are not doing well enough (what they called “imperiled”). If these powers were given to Geithner, I can see how the definition of “imperiled” could become just about anything he (and Obama) wanted it to be.

Treasury Secretary Timothy Geithner asked Congress Tuesday to give the White House unprecedented powers to seize large insurers, investment firms and hedge funds, leaping beyond its present authority to seize only banks.

Geithner argued for such authority during the House Financial Services Committee’s hearing on the handling of bonuses paid to executives at American International Group.

“As we have seen with AIG, distress at large, interconnected, non-depository financial institutions can pose systematic risks just as distress at banks can. The administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context,” Geithner told the committee.

“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,” he said.

President Obama said later Tuesday that he hopes “it doesn’t take too long to convince Congress” that it should approve the new powers.

But Republican leaders were quick to express skepticism Tuesday at the prospect of expanding Geithner’s authority.

“I’m a little concerned,” House Minority Leader John Boehner told reporters during a press conference. “This is an unprecedented grab of power and before that occurs, there ought to be a real debate about whether we should give that authority to the Treasury secretary.”

House Democratic leaders also showed reservation over supporting the administration’s call for expanded authority.

House Majority Leader Steny Hoyer told reporters Tuesday: “I want to discuss it with a number of people. Obviously one of the issues that Congress is concerned about is the delegation of authority. We are talking about huge sums of money — huge consequences for one individual.”

“At this point in time, I want to look at it more carefully,” he added.

Geithner called on Congress to grant him new powers to regulate huge financial companies like insurance giant AIG, whose failure would pose a grave danger to the U.S. financial system and the broader economy.

Specifically, the Treasury secretary asked for powers similar to those of the Federal Deposit Insurance Corporation, which has authority to seize control of banks, take over their bad assets and sell good ones to competitors.

“AIG highlights broad failures of our financial system,” Geithner told the House Financial Services Committee. “We must ensure that our country never faces this situation again.”

Federal Reserve Chairman Ben Bernanke, appearing with Geithner, agreed. He said the government’s bailout of AIG underscores the urgent need to wind down financial giants on the verge of collapse and subject them to much stronger regulatory oversight.

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