U.S. Seeks Expanded Power to Seize Firms

Read the testimony and you tell me.

By your train of logic, if "regulating" = "running", than the Government has been running the commercial banking sector in this country since the Great Depression - as the banking sector is under the same regulatory regime via the FDIC and the Federal Reserve that is now being proposed for certain non-bank financial institutions.

Is cannot be your position that the Government has been "running" the commercial banking sector in teh US for the last 70 years? Or is it?

 

That's what irks me about this. They can call it "regulating" all they want, but to what extent are they "regulating" or making important decisions in the company? I just hope the new powers aren't vague and broad, allowing the government to abuse them. However, knowing our government, that is something we should just expect.

 

The move towards this power does make me flinch a bit, but since these companies are already so large that we can't let them fail or the economy fails with them, something does need to be done to control or at least regulate what they are able to do, especially where the government has already had to intervene to prevent their sinking.

I am not as versed as many here on the topic, but i appreciate both sides of the argument. What I wonder is, when are they going to talk about regulating future companies from becoming "Too big to allow them to fail?" I realize right now they've got more on their plate than they can handle, but it seems to be a major factor of why we're in the boat we're in. Is this cataclysm related to de-regulation of the formation of pseudo-monopolies by past presidents and congresses? And by that, I mean Dems and Reps alike, so don't even start the party finger pointing there. You know who you are.

 

I'm waiting for somebody to suggest seizing the federal government. Congress is far more out of control than any bank or financial institution, has much bigger deficits and somewhat more limited prospects of repaying loans without ending capitalism. Oh, I forgot. Their perks and "bonuses" (postage, airfare, private planes, etc.) are much greater than any Wall Street bonus. Is it time for another "million man" march on the capitol? Just curious.

 

So you see no difference between "running" and "regulating"? When I design a house I follow building codes that regulate my design. The code official doesn't design the house.

Do you understand the distinction?

 

Yes, I understand the distinction.

I understand it perfectly. And what we are discussing is a regulatory regime. Read the testimony.

That's why I am confused at you comparing an FDIC/Fed Reserve style regulatory regime of the type that has been in place for decades for banking - and that is proposed to be extended to other non-bank institutions which behave like banks - with Socialism or even state owned-corporations, such as Amtrak.

That's why I asked you the earlier question - if what I am describing si the same as "running" - and what I am describing is what is in the testimony " - then is it your position that the government has been "running" the commercial banking sector in the US for the last century or so?

What is your answer? Yes or no.

The answer appears to be yes - and that is really absurd.
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Where exactly are you hearing anything like this? That's not at all what the goal of this is. Of course they would run the companies while winding them down or selling them of - as they do with all the banks the FDIC seizes, but not on an ongoing long-term basis.

 

This is nice, but...

Citi is a financial institution they can seize, why hasn't it been seized yet? What's the point of this power if they are scared of using it when the company is too big?

 

[rquoter]The U.S. government as a conservator or receiver would have additional powers to sell or transfer the assets or liabilities of the institution in question, renegotiate or repudiate the institution's contracts (including with its employees), and prevent certain financial contracts with the institution from being terminated on account of the conservatorship or receivership. [/rquoter]

That was cited from the testimony you had posted earlier which sounds to me very much like running the institutions that are taken over.

I understand they and you are using the term "regulation" but what is described sounds a lot more like "running." I understand the government has had this power in regard to banks and as I conceded there are certain socialistic aspects to our country. That doesn't make me any more easy with expanding the power of the government to seize control of all sorts of businesses.

Do you see no potential for problems from government running financial institutions?

 

I'm glad you agree they are going to be running the companies that was my point.

I'm glad to hear any takeover will be temporary but at the same time I'm still not comfortable with the idea of expanded powers to seize businesses.

 

First, the regulation might include the authority to "run" a company if necessary in certain situations and for short periods of time. It's still a regulation if they are unlikely to use that authority, because there is much more to the legislation beyond the potential to use that authority. The entire goal is to use smaller regulations to help these big firms avoid the need for major government intervention in the future.

Second, they've had that authority with banks for a long time, but you don't appear to have any problem with the way that authority has been used, so why is this proposal so much more dangerous than the current authority for banks?

Third, they have the authority to take over Citi and Bank of America, and some have suggested that they do it. But they haven't done it. Doesn't the fact that this administration (who many fear is socialist) has avoided nationalizing banks to this point indicate that the chances are low that these other companies will be "run" by the government?

It sounds to me like you are just afraid that the government wants to set it up so they can permanently run major corporations, but that's not what is being proposed and our history with the FDIC has shown that that is not what happens. Anything is possible but I don't think your fear is all that founded.

 

This means running them in the event of an emergency where the institution is going to fail like the FDIC system rather than two bad choices, the two choices which currently:

1. letting them fail in Chapter 11 and cause absolute chaos and destruction (in the case of Lehman - please read up on the bankruptcy to see how well that is going)

2. Giving them a giant pile of money in piecemeal, ad-hoc arrangements like AIG and letting bad actors (like AIGFP employees and their retention bonuses) escape and the counterparties collect ALL their risk on the back of the taxpayer under extreme pressure.

Both of these two options have demonstrably failed in the past, whereas the FDIC system has worked largely well in keeping most of the banking sector from destroying itself like it did in the 20's and 30's - what is your basis for saying that the present system is bad, aside from a pretty Hoover-esque argument that "the gov't is corrupt and makes bad choices!" (Keep in mind the supreme irony of making that in the context of a private sector meltdown engineered by what was essentially corruption).

LOL - all sorts of businesses? Again, you need to go back and read the testimony to understand what is being discusssed here. As has been explained, this is intended to close loopholes in Depression era-laws that allow certain non-bank financial institutions to destablize the entire economy, like you know, what just happened.

Again - the FDIC has been doing this for years - and has managed to prevent major banking meltdowns that were common in the early 20th century for the most part. THe biggest meltdown was the S&L crisis - which ended up with, yup, you guessed it, a government takeover and the creation of the RTC.


Let's take Indymac - that is the last major instutition to emerge from Government control (takeover in July 2008, sale to private investors in March 2009).

What problems did you see with the FDIC "running "IndyMac for 7 months or so - do you have some sort of beef with the way the Indymac takeover/sale that was handled?


Or are you just arguing a generality? I think it is the latter.

 

So again - do you have a problem with the FDIC and what they do with failed banks? It's the exact same thing - and is considered one of the most effective and efficient thing the government does.

Same question to you - are you against the FDIC?

 

This post:

 

I don't know, but I would assume because Citi is much more than a bank. Citi and AIG are the poster childs of deregulation.

 

The point of seizing is to shut it down in an orderly manner. I don't think the government wants to shut down Citi.

Lehman and AIG are examples of the types of companies that would be targetted - companies that need to be wound down as quickly and as efficiently as possible.

 

This isn't new. It's been done before. There's nothing communist about it. They're not seizing modes of production. They're managing real property and financial assets that are distressed and overvalued...which have to be worked through the system to be cleaned off the books so that banks can be banks again.

http://en.wikipedia.org/wiki/Resolution_Trust_Corporation

Eventually they spin off distressed assets and investors buy them through auctions...manage them...rehabilitate them...flip them....make income off of them...and pay taxes on that income. Aside from the practice of law, this is what I do.

 

You obviously didn't read CHAPTER 11 of The Communist Manifesto.