Like expensive bank bailouts? You'll love the financial bill the House just passed
In 2008, with the American banking system on the brink of collapse, policymakers faced a grim choice: bailout or catastrophe. An attempt to administer tough medicine — by letting Lehman Brothers file for bankruptcy — backfired. Financial panic rapidly accelerated, forcing the government to change tack and stand behind the rest of the financial system.
In the years that followed the crisis, President Obama and Congress put into place safeguards to prevent Washington from again being forced into such a choice by institutions that were “too big to fail.” Today, large financial institutions are subject to much more stringent regulation, and if they get into trouble, the government has important new tools to wind them down without taking down the rest of the financial system. As a result, firms cannot take outsize risks on the assumption that if their bets go wrong, the government will sweep in and prop them up.
Yesterday, the House passed a bill that aims to eviscerate the very reforms that make a repeat of the 2008 scenario less likely. The so-called Financial CHOICE Act — approved by a party-line vote — eliminates two of the key reforms specifically designed to prevent another bailout.
Although the bill is supported by the Trump administration, it would directly undercut an executive order President Trump issued on February 3. One of the “Core Principles for Regulating the United States Financial System” laid out in that order was: “prevent taxpayer-funded bailouts.” The CHOICE act, however, would invite future bailouts.
https://www.msn.com/en-us/money/markets/like-expensive-bank-bailouts-youll-love-the-financial-bill-the-house-just-passed/ar-BBCeWdx?li=BBnbfcN&ocid=edgsp
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