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Obama Wants Power to Seize More Firms

From a cheerleading Washington Post:

President Evo Morales of Bolivia with an army escort while visiting the San Alberto gas field, where he announced the nationalization of the country’s petroleum industry. The banner behind reads, "Nationalized. Property of the Bolivians."

U.S. Seeks Expanded Power to Seize Firms

Goal Is to Limit Risk to Broader Economy

By Binyamin Appelbaum and David Cho
Tuesday, March 24, 2009; A01

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers.

The administration’s proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed’s other responsibilities, particularly its control over monetary policy.

The government also would assume the authority to seize such firms if they totter toward failure.

Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG’s most troubled unit.

The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan.

Geithner plans to lay out the administration’s broader strategy for overhauling financial regulation at another hearing on Thursday.

The authority to seize non-bank financial firms has emerged as a priority for the administration after the failure of investment house Lehman Brothers, which was not a traditional bank, and the troubled rescue of AIG

Just in case anyone was wondering why the long known bonuses to the AIG employees have been played up so heavily by our political and media masters.

It was being done to clear the path for further nationalization – to protect us, of course.

Goal Is to Limit Risk to Broader Economy

Isn’t that what Hugo Chavez says?

Isn’t that what they say in Bolivia? And in Zimbabwe?

(Thanks to TerryAnne for the heads up.)

This article was posted by Steve on Tuesday, March 24th, 2009. Comments are currently closed.

7 Responses to “Obama Wants Power to Seize More Firms”

  1. pdsand says:

    “would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers”
    The whole point of the bailout and all the stimulating is that these companies are too big to fail, remember? Why are we now interested in winding down operations at little cost to taxpayers? That is the purpose of bankruptcy court. It appears whoever wrote this article failed to mention that this would allow the President to assume the powers of the judiciary. Article 3 of the U.S. Constitution be damned.

  2. Confucius says:

    Where is Hank Paulson these days? And why isn’t anyone harrassing him?

    • proreason says:

      I was called a nut when I said Paulson and Bernacke were a part of this back in November and December.

      Now Paulsen is in hiding, and Bernacke has printed a trillion dollars.

    • Consilience says:

      PR, Literally speaking, the Fed only has to make a key stroke to “create” the 1 trillion—-they don’t even have to print it…

  3. Liberals Demise says:

    I say, Who here is up for some “Tea & Crumpets?” (said in a heavy British accent)

  4. vdavisson says:

    ‘It’s obvious that measures have to be taken. Drastic measures,’ said James Taggart, speaking, not to Mr Thompson, but to Wesley Mouch. ‘We can’t let things go the way they’re going much longer.’ His voice was belligerent and shaky.

    ‘Don’t look at me,’ snapped Wesley Mouch. ‘I can’t help it. I can’t help if people refuse to co-operate. I’m tied. I need wider powers.’

    ‘Go ahead, Wesley,’ [Thompson] said. ‘Go ahead with Number 10-289. You won’t have any trouble at all.’

    ‘If you want me to go ahead, you’ll have to declare a state of total emergency.’

    ‘I’ll declare it any time you are ready.’

    ‘The chief difficulty is that I am not sure whether the law actually grants us the power to put into effect certain provisions of Directive Number 10-289. I fear they might be open to challenge.’

    ‘Oh, hell, we’ve passed so many emergency laws that if you hunt through them, you’re sure to dig up something that will cover it.’

  5. TwilightZoned says:

    One small step for Obama; one giant leap into socialism.

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