More details on Pres. Obama's proposed new financial services authority have come to light.
According to CNBC.com, the agency would be given powers over bank holding companies similar to the FDIC's ability to temporarily take over failing commercial banks until a prearranged buyer is ready to purchase the troubled institution. The proposal was originally supposed to be included in a broader reform package addressing systemic risk but is instead being developed as stand-alone legislation in the wake of the AIG bonus debacle, said the report.
FDIC Chairman Sheila Bair told Congress that the government's policy of bailing out firms that were perceived as too big to fail must be replaced, the article continues.
"The legislation now in development would apply to companies that represent a systemic risk to the financial sector and the overall economy and would thus include companies such as the insurer AIG, which the government has poured tens of billions of dollars into to help avert its failure, and Citgroup, which has a huge non-banking operation, including investment and insurance services."