The administration on Thursday sent Congress legislation that would enable the federal government to take over large financial institutions whose collapse could undermine the entire financial system.
The administration’s proposal, designed to correct problems exposed by the financial crisis that struck last fall, would give the Treasury Department the authority to appoint either the Federal Deposit Insurance Corp. or the Securities and Exchange Commission as the conservator for troubled financial companies that pose a threat to the economy.
The administration is seeking expanded powers to avoid being forced to decide whether to provide costly bailouts — as it did with giant insurer American International Group — or allow the firm to collapse with severe consequences for the financial system, as happened last September when it allowed Lehman Brothers to file for bankruptcy.
The White House also formally proposed merging the functions of the Office of the Comptroller of the Currency and the Office of Thrift Supervision into one regulatory body, the National Bank Supervisor, in an effort to halt the practice by some institutions to shop for the most lenient federal regulator.
The administration unveiled the various proposals on June 17 as part of the most extensive overhaul of financial rules since the 1930s. It earlier put forward language for the creation of an agency to protect consumers by improving regulation of such financial products as mortgages and credit cards.
Still remaining to be sent to Congress is the proposed bill dealing with improving regulation of complex financial instruments known as derivatives. Administration officials have said that language will be submitted before Congress leaves on its planned August recess.
Copyright 2009 The Associated Press.