Posted on 03/10/2009 8:22:52 PM PDT by rabscuttle385
WASHINGTON (Reuters) - U.S. policymakers must develop a way to handle the failure of a systemically important, financial conglomerate, possibly modeled after the Federal Deposit Insurance Corp's procedure for smaller banks, Federal Reserve Chairman Ben Bernanke said on Tuesday.
The FDIC has hinted it could take on that job, with Chairman Sheila Bair saying recently that the agency's model for failed banks works well. But she said the FDIC would need more authority and resources to resolve financial conglomerates.
The FDIC insures about $4.5 trillion of deposits at more than 8,000 banks. It has the authority to take over an insolvent depository bank, but cannot put a bank's parent holding company into receivership.
For example, the FDIC would have the authority to take over Citigroup's Citibank depository banking unit if it was deemed insolvent. But the agency would not have the authority -- or the resources -- to bring all of Citigroup into receivership.
"We have discussed the need for dealing with large non-bank financial institutions -- similar to the FDIC's authority for chartered institutions," FDIC spokesman Andrew Gray told Reuters without mentioning any specific firms. "We think that there is a critical need for this, and that our resolution process has worked well."
Citigroup Chief Executive Vikram Pandit said on Tuesday the firm was profitable in the first two months of 2009 and is confident about its capital strength, easing concerns about its survival prospects.
Without identifying any institutions by name, Bernanke said the United States "needs improved tools to allow the orderly resolution" of a big, systemically important financial firm.
(Excerpt) Read more at reuters.com ...
“...would need more authority and resources ...”
The salient point.
Think this is going to be used as just an excuse to expand the FDIC power as part of Obamas grand new deal.
Put Citi into Federal receivership. Place the Citi depository institution under the control of the FDIC and let the receiver liquidate the remaining holding company assets through divestiture, etc.
Hey Geithner! That'll be a $25 million consulting fee please! Very stimulating! email me, dude! You owe me.
The part that bothers me is the orchestrated press favoritism of Sheila Bair, as if she’s the solution. If that were true, maybe I would be able to recall her prescient warnings of the impending credit crisis (say in 2006 or so), or see risk-based deposit insurance premiums in place. Her press is too good to be true.
She reminds me of the "in Crowd" in high school. Popular kids loved by the "in crowd" and teachers alike. Most turn out to be losers, though as life requires more than being "in!" She's a classic example of conferences, seminars, TV appearances, nice hotels, fine dining with other "in crowd" people and, inevitably, not much in the way of results. I hear her staff has issues with her showy style...
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