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Volcker: Obama Plan May Lead to More Bailouts

Former Fed chief faults strategy of 'too big to fail'

By the Associated Press

Posted Sep 24, 2009 5:27 PM CDT
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(AP) – A top White House economic adviser says the Obama administration's proposed overhaul of financial rules preserves the policy of "too big to fail" and could lead to future bailouts. Former Fed chief Paul Volcker told Congress that by designating some companies as critical to the broader financial system, the plans create an expectation that those firms enjoy government backing in tough times. That implies those financial companies "will be sheltered" by a "federal safety net," he said.

Lawmakers should make clear that nonbank companies will not be saved with federal money, he said. Volcker told a House panel that he does not differ with the administration on most of its proposals and takes "as a given" that banks will be bailed out in times of crisis. But he opposed bailouts of insurance firms such as AIG, automakers' finance arms, and others.

Former Federal Reserve Bank Chairman, and current White House economic adviser, Paul Volcker testifies on Capitol Hill in Washington, Thursday, Sept. 24, 2009.
Former Federal Reserve Bank Chairman, and current White House economic adviser, Paul Volcker testifies on Capitol Hill in Washington, Thursday, Sept. 24, 2009.   (Susan Walsh)
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COMMENTS
Showing 3 of 15 comments
pwnage
Sep 25, 2009 12:04 PM CDT
I suspect 'don'tlike' is actually a Democrat spreading vitriolic verbiage in the name of a Republican. There don't appear to be many coherent economic conservatives around here.
SilenceDogood
Sep 25, 2009 11:34 AM CDT
Mein Kampf bullshit.
SilenceDogood
Sep 25, 2009 11:31 AM CDT
Dr. Zaius, as you previously noted a large part of this economic bust we are in is attributed to the repeal of the Glass-Steagall act by the Clinton administration in 1999 by President Clinton and a largely Republican led Congress forcing this bill through. Another cause of this collapse should be attributed to the sub-prime mess and the bi-partisan support of “a house for everyone” causing the need for lower credit standards. Both of these issues probably caused what otherwise would have been a speed bump to turn into a brick wall. What we appear to be facing now is a deflationary trend in our assets and an inflationary trend in our currency. For an excellent discussion of these events please see http://seekingalpha.com/articl... and download the debate by hitting the link on the second sentence. “Mish and Daniel Amerman” It a great discussion. To attempt to blame the Republicans is simply not true, this is a bipartisan screw-up. I also have learned to have more respect for Senator Ron Paul; I think he is more on top of the situation than our current administration.

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Wall Street • General Motors • Paul Volcker • AIG • bailout • bank regulation • Obama administration • Wall Street bailout

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