Does there really need to be federal insurance for NBFI’s? Sounds to me its just an easy way for the Government to pick up financial institutes on the cheap. If the need should ever arise.
House Speaker Nancy Pelosi, welcomed a proposal from Treasury Secretary Timothy Geithner to give the Treasury the authority to unwind large, nonbank financial institutions that have become insolvent.
Pelosi said that the proposal, raised by Geithner in testimony before the House Financial Services Committee on Tuesday, would “help us move forward in a positive way.”
The idea has been floating around for some time, and had been previously endorsed by Rep. Barney Frank, D-Mass., chairman of the financial services panel.
But Pelosi’s explicit endorsement of the proposed expansion of the Treasury’s regulatory powers, is significant in its chances of success.
The plan would involve significant extra powers for the Treasury to move into firms that are insolvent or on the verge of failure and ensure they unwind orderly. The Federal Deposit Insurance Corp. has the authority to act similarly with banks that fail, but no such regulatory authority exists for nonbank financial institutions.
A key part of any overhaul of the financial regulatory landscape will involve ensuring that another American International Group-type situation not be allowed to occur. The federal government has had to pump in more than $170 billion into AIG to ensure that it didn’t fall into bankruptcy and cause chaos to global financial markets.
-By Corey Boles, Dow Jones Newswires; 202-862-6601; corey.boles@dowjones.com
via WSJ.com
