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Frank, Geithner to Roll Out 'Too Big to Fail' Bill

New rules will impose 'living wills' for banks

By Jason Farago,  Newser Staff

Posted Oct 26, 2009 6:57 AM CDT
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(Newser) – After months of negotiations, Congress and the Obama administration are ready to introduce new rules on financial institutions deemed "too big to fail." Barney Frank, who heads the House Financial Services Committee, will present a bill as soon as this week that will let the government seize companies, fire executives, wipe out shareholders, and rejigger loan books. Tim Geithner is planning to endorse the plan in testimony on Thursday.

Under the Geithner-Frank plan, companies will have to set up individual crisis procedures, a system the New York Times calls "living wills for corporations." But other policymakers and economists, including Britain's central banker and former Fed chairman Paul Volcker, are urging more drastic action: the breakup of overlarge banks, whose market share has only grown after Lehman and Bear Stearns collapsed. Ben Bernanke said on Friday he prefers "a more subtle approach," and an administration official called breaking up the banks "more a provocative idea than a proposal."

Treasury Secretary Timothy Geithner speaks before the start of the the G-20 summit, Thursday, Sept. 24, 2009 in Pittsburgh.
Treasury Secretary Timothy Geithner speaks before the start of the the G-20 summit, Thursday, Sept. 24, 2009 in Pittsburgh.   (AP Photo/J. David Ake)
House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., at a hearing last month where Treasury Secretary Tim Geithner testified.
House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., at a hearing last month where Treasury Secretary Tim Geithner testified.   (AP Photo/Susan Walsh)
House Financial Services Committee Chairman Rep. Barney Frank, D-Mass.
House Financial Services Committee Chairman Rep. Barney Frank, D-Mass.   (AP Photo/Susan Walsh)
Tim Geithner and Barney Frank before a hearing on AIG bonuses earlier this year.
Tim Geithner and Barney Frank before a hearing on AIG bonuses earlier this year.   (AP Photo/Evan Vucci, File)
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COMMENTS
Showing 3 of 8 comments
freethemall
Oct 27, 2009 6:26 AM CDT
Sounds like a case of closing the barn door after the cows got out, to me. Oh well, better late than never.
northeast
Oct 27, 2009 2:40 AM CDT
....thank you, OG Travis. I'm glad you took the time away from practicing your c-walk or bussin' gats or doing whatever OG's do to (not) read the post and then scream at me for agreeing with you.
northeast
Oct 26, 2009 12:27 PM CDT
Having that system in place makes a future bailout likely the first/only response to a crisis, while ignoring the serious fundamental questions we still have about being forced to pay for someone else's mistakes. Frankly, this is an unprecedented increase of government power with a misleadingly catchy name. If we truly wanted to limit the size of financial entities and preclude disasters, why not decrease the cap on total deposits to 7.5% from the 10% it currently occupies?

 
House Financial Services Committee • bank • Treasury Department • Barney Frank • bank regulation • financial crisis • Timothy Geithner • financial reform

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