Question: Were Congress to hand the Treasury Department and Federal Reserve “broad new government authority to regulate or even take control of financial institutions other than banks,” who would be the beneficiary?
The answer might lie in this description of the plan on The New York Times web site:
The government has such authority for banks; the Federal Deposit Insurance Corporation has power to step in to clean up a bank’s books and alter business practices like executive compensation. There is no such federal authority for non-bank entities, like A.I.G., that in recent years have become bigger players in the financial system. Sheila C. Bair, the chairwoman of the F.D.I.C., has said she believed such authority was necessary.
The administration — because of its ties to Wall Street via its financial team — has been too cautious in dealing with the financial sector, playing to accepted cliches that no longer apply (not that they ever did). Those ties raise questions, as David Sirota points out, about whether the administration would have used the authority it is now seeking.
However, if the populist pressure out there is making them demand this authority, then that’s a good thing. Once they have this authority, they will have a harder time pretending they can’t do anything to stop the kleptocracy.
