Bair: Break Up the Financial Supermarkets

“The FDIC is up to the task, and whether alone or in conjunction with other agencies, the FDIC is central to the solution. Given our many years of experience resolving banks and closing them, we’re well-suited to run a new resolution program.”

-Federal Deposit Insurance Corp. Chairman Sheila Bair

This is a fascinating — and not wholly unexpected — development: A push for more FDIC authority:

“Federal Deposit Insurance Corp. Chairman Sheila Bair sought authority to close “systemically important” financial firms, marking her boldest attempt yet to expand the agency’s reach.

The FDIC should be able to take over and shut bank-holding companies and other large institutions instead of just failed commercial banks, Bair said today in a speech at the Economic Club of New York. Such power would shield taxpayers from losses when government protects companies deemed “too big to fail,” a concept that should be “tossed into the dustbin,” she said.”

Considering the FDIC is the most competent of the Federal Regulators over the past decade, we shouldn’t be surprised. The crisis has enhanced the agency’s reputation, certainly versus the SEC or the Federal Reserve.

Meanwhile, Citigroup and Bank of America each fell about7 % in pre-market trading on concern the companies may be forced by regulators to raise more capital.

Citigroup and Bank of America have already received $90 billion in bailout momnies, plus another $550 billion in federal guarantess on their toxic assets.

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Sources: Bair Seeks to Expand Power, Ending ‘Too Big to Fail’ Alison Vekshin Bloomberg, April 27 2009 http://www.bloomberg.com/apps/news?pid=20601087&sid=a2Hy2M0SSVqs&r

See also: Fed Pushes Citi, BofA to Increase Capital DAN FITZPATRICK, DAVID ENRICH and DAMIAN PALETTA WSJ, APRIL 28, 2009


Originally published at The Big Picture blog and reproduced here with the author’s permission.

http://online.wsj.com/article/SB124088901025362487.html