Posted by MataHarley on 18 March, 2009 at 4:37 pm. 5 comments already!

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When US banks are in trouble, the FDIC is empowered to seize the banks, and dispose of the assets.

Now Obama is fast tracking legislation to create a new regulatory agency – a “resolution authority” to do the same for other “financial institutions” using AIG, and it’s bonus contracts, as the example for it’s need.

AP’s Economic Writer, Martin Crutsinger’s lead paragraph chills one to the bone…

President Barack Obama seeks new powers that would allow his administration to seize troubled companies like the insurer AIG β€” and take ownership of their toxic assets β€” if their collapse would threaten the financial system.

Who is the authority who decides if a company’s collapse would “threaten the financial system”? And where does this end?

Specifics on the new entity? But of course not.

“This is part of the broader package of financial regulatory steps that we’re going to be taking that ensures that, going forward in the future, we’re not going to find ourselves in these kinds of terrible positions again,” Obama told reporters before departing on a trip to California.

Administration officials did not provide any details on how the new resolution authority would be financed. That could be a key sticking point in Congress.


The outlines of the Obama administration’s regulatory overhaul package are expected to be unveiled as early as next week, in advance of an April 2 meeting that the president will attend on the financial crisis in London.

~~~

One administration official, speaking on condition of anonymity because a detailed plan has not yet been released, said that the proposal would give the treasury secretary the power, after consulting with officials at the Federal Reserve, to take control of a major financial institution and run the company in a type of conservatorship.

They’re only worried about the cost of these new business czars?? Dear god…. And more power in the hands of the Treasury Secretary? Mercy….

And what, pray tell, will they use as parameters defining a “financial institution”?

According to the WSJ report on this new entity, it all seems to stem from Obama and Barney Frank’s outrage at not being able to legally intercede in private contractual issues… i.e., the AIG bonuses.

The president said he spoke with House Financial Services Committee Chairman Barney Frank this morning about granting him “resolution authority” similar to the power the Federal Deposit Insurance Corp. has over the thrifts it regulates. That would allow his administration to potentially abrogate contracts that it can show does not serve the good of newly regulated entities like AIG.

Obama said he needs the regulatory power “to allow us proactively to get out in front, to separate bad assets from good in dealing with contracts that may be inappropriate.”

Frankly, I do not want to set precedents that government has the power to negate contracts made between two willing private parties. And the legal world is just waiting for such an overreach by government.

But is this only for the companies that Congress is busy nationalizing with their sundry bailouts? Hard to tell. Because Obama wants the US public to look even further than federal interference in private contracts, but sees this new entity as a preventative measure for future financial woes…. asking them “to consider broader issues of re-regulating the financial system to prevent the kinds of institutional collapses that have dragged the entire economy down with firms like AIG, Bear Stearns, Fannie Mae and Freddie Mac.”

“We’ve got to have tools that under our legal authority we can do something about this,” Obama said.

Prevention of insitutional collapses. uh oh…

Fast tracked to boot… will this be considered emergency legislation? Wonder if the public will get their five days to view this piece of legislation. Or if the Congress will bother to read the bill.

This new power to “seize” and control liquidation of companies for the good of the country’s economy. You must be joking. But I’m quite sure that back in Venezuela, Hugo Chavez is smiling, and giving an approving nod.

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