Interesting - Why Is Obama Administration Asking For Power To Seize Financial Firms?

[Median Democrat]

I thought nationalization was off the table. If its off the table, why is the Obama administration asking for power that could essentially allow it conduct a partial nationalization. Why does the federal government need the power to seize insurers like AIG or investment banks. You can only imagine how Wall Street will react if the federal government actually has the power to seize AIG.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/23/AR2009032302830.html?hpid=topnews

/snip

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury's role, are still in flux.

* * *

The administration's proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed's other responsibilities, particularly its control over monetary policy.

The government also would assume the authority to seize such firms if they totter toward failure.

Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG's most troubled unit.

/snip

[dkf]

1. Its nationalization if you consider Indymac nationalized.

I'd call that "sold off in pieces myself".

[Median Democrat]

3. I Think Krugman Referred To Indymac As An Example Of Nationalization

To show that it can be, and has been done.

[dkf]

5. Yes, but that isn't the type of nationalization that makes

Republicans freak out.

[Political Heretic]

18. I think its just the word that makes republicans freak out.

You call it by another name, they might be fine with it.

DEM: It's not "Nationalization" its our new program we like to call....IbeatofftoAynRandization!

GOP: OMG WE LOVE IT!!

[Norquist Nemesis]

2. Ummm...maybe it's kinda because you gotta do what you gotta do

So, Wall Street's been selling Obama down the river without a paddle. I say he should go for it.

[Hekate]

4. Obama did say he was "eternally optimistic, but not a sap." I think his detractors should remember.

[w4rma]

6. Extremely good. (nt)

[Thrill]

7. Obama has never said its off the table

Another example of people not actually listening to Obama

[vaberella]

9. Ain't that the truth. Oy. n/t

[FrenchieCat]

8. I posted this over in GD!

They need the power!

[vaberella]

10. FC you are way on top of the game. At this point you're ahead of it. n/t

[FrenchieCat]

13. Not really.....

checking my time post, I was the lagger! :)

[Pirate Smile]

24. There's a stupid on-line poll on CNN asking whether they should be given the power

through legislation to take over these larger financial institutions like AIG or Citigroup like we take over smaller banks - it is losing 41% - 59%.

There are way too many idiots running around.

If the government had that power, they would have used it. It doesn't exist yet but people don't want to give it to them. Uggghhhh.

[sandnsea]

11. To put the cards on the table

so some people can see the obstacles to nationalization, while Obama guages the backlash if he went ahead with it.

[FrenchieCat]

12. Folks don't want him to gauge anything......

they just want him to throw himself on the train tracks and close his eyes, and wish like hell.

They don't care about the political ramifications.
They don't care about strategy!
They forget what the media does 24/7...
and I'm starting to think that they don't think nothing should get in the way
of a good bitch at Barack Obama expense 24/7.

[BlooInBloo]

14. :) Told ya.

:P

[Political Heretic]

16. We've done this before, its not "untested.,"

What I'm in favor of is pretty much exactly what we already did with savings and loans in the 80s. So I don't feel like its this completely out of the blue untested notion that is so crazy radical.

[Political Heretic]

15. I've been sitting her scratching my beard for 30min trying to figure that out

and get up to speed on this new wrinkle.

It sure seems like a potential positive development as far as I can tell!

[Median Democrat]

20. You Have A Beard?

<http://www.smh.com.au/ffximage/2007/10/14/georgeclooney_narrowweb__300x450,0.jpg>

[Political Heretic]

26. It doesn't make me look as cool as that though :(

[Political Heretic]

17. One thing I wanted to mention - the "authority to break contracts" part could bite us later.

This sounds fine now, but down the road when god forbid some lesser administration is in the White House - do we want the government to have such clear power to break contracts? What if they use this and disguise union-busting practices through it?

In theory this seems like an important power to have, but I'm concerned about its abuse. That said I was just in a big argument the other day about how simply a special condition power authorizing the government to break contracts was not going to spell gloom and doom for employee contracts across the board. So, I'm clearly I'm waffling on this....

[Jennicut]

22. I know, Bush consistently abused the powers of the executive branch.

But its really a needed power right now given the state of AIG and other firms.

[Igel]

27. But at the time *'s supporters made the same argument:

"It's really a needed power right now given the perceived terrorist threat."

"It's really a needed power right now given the possibility of Saddam's having reconstituting his weapons programs."

Our response was that it wasn't a real crisis, that they were just trying to gain power by making us afraid. "Fear! fear!" Not as cynical as many, as far as I could tell they actually believed it--it's unpleasant to think this because it makes us not think less of them, and thinking less of them seems to be a moral imperative.

However, I think they believed in the threats they feared just as as politicians now believe in the threats they fear.

Sorry. I wasn't very appreciative when fear was used to motivate me to unconditionally accept granting more power to the government then, and I'm not very appreciative when fear is used to motivate me to unconditionally accept granting more power to the government now. For every threat the response from government is the same: We know more, we're better people, give us more power and we'll use it wisely--you can trust us, it's patriotic to trust us and unpatriotic to question us.

[Dreamer Tatum]

29. No, it WILL bite us later

This is a very dangerous road to travel, and a prime candidate for the Law of Unintended Consequences.

[northernlights]

19. Robert Reich said this past Sunday

that receivership is the next thing to happen if/when the current bailout fails. Reich re-iterated Krugman and others who said that receivership is what needs to be done to fix the economy. And he said that Geithner has been doing a "herculean job" of holding things together in the meantime. Reich just wished they would move faster on the receivership front.

In other words, the bailout -- similar to the auto company bailout last fall -- was to keep them from collapsing while a long term fix is planned.

The options were let everything collapse -- and literally have people starving in the streets and supermarket shelves empty. Or keep everything afloat and fix the problems.

The rethugs wanted to just let things collapse and let the people at the bottom literally starve and freeze in the streets. Obama did not. (And now the rethugs wonder why they lost the election, lol.)

One thing I've learned in life is that successful people always have backup plans. They don't count on any one thing working out. What's always amazes me is the ones who are able to work multiple plans at once. I swear they must put in 80 hour days! It's like walking, chewing gum, juggling 8 balls and singing a song -- all at once.

Remember, we've *never* been in the position we are in right now, as a country. *Nobody* knows what will work for sure. Obama himself has said, more than once, we'll try one thing and if it doesn't work, we'll try something else. So receivership is the next plan. Any failing bank that doesn't tow the line will be taken over, broken apart and re-privitized.

[Jennicut]

21. That is exactly what I think as well. We are taking steps closer

to giving the govt. more authority not less. Libertarians and free market Rethugs are idiots.

[Lilith Velkor]

23. 732 comments!

:wow:

Mostly right-wing idiots having tantrums, of course. :eyes:

[glitch]

25. This is more like it.

A cautious :applause:

[Puzzler]

28. I think he's just asking for the same power as the FDIC...

... has over banks, when it moves in.