U.S. eyes reining in ‘too big to fail’ institutions

[Ladywriter 7,783]

Measure would make it easier for government to seize ailing Wall St. firms

The measure would make it easier for the government to seize control of troubled financial institutions, throw out management, wipe out the shareholders and change the terms of existing loans held by the institution.

The White House plan as outlined so far would already make it much more costly to be a large financial company whose failure would put the financial system and the economy at risk. It would force such institutions to hold more money in reserve and make it harder for them to borrow too heavily against their assets. Setting up the equivalent of living wills for corporations, that plan would require that they come up with their own procedure to be disentangled in the event of a crisis, a plan that administration officials say ought to be made public in advance.

“These changes will impose market discipline on the largest and most interconnected companies,” said Michael S. Barr, assistant Treasury secretary for financial institutions. One of the biggest changes the plan would make, he said, is that instead of being controlled by creditors, the process is controlled by the government.

Some regulators and economists in recent weeks have suggested that the administration’s plan does not go far enough. They say that the government should consider breaking up the biggest banks and investment firms long before they fail, or at least impose strict limits on their trading activities — steps that the administration continues to reject.

Deep-seated voter anger over the bailouts of companies like the American International Group, Citigroup and Bank of America has fed the fears of lawmakers that any other changes in the regulatory system must include the imposition of more onerous conditions on those financial institutions whose troubles could pose problems for the markets. Some economists believe the mammoth size of some institutions is a threat to the financial system at large. Because these companies know the government could not allow them to fail, the argument goes, they are more inclined to take big risks.

Too big to fail is a misleading concept over all.

ex The planet earth is too big to fail, but species go extinct anyway.

ex GM is too big to fail, but dropped 2 car companies, their workers lost jobs health insurance etc....

If companies are going to become so massive their failure screws over a nations entire economy.... we have 2 choices. Either we create legislation that prevents a co from becoming that big in the first place or we create legislation that requires them to run their cos in a self sustaining and stable way ie no bs scheming that will prevent them and their fail from screwing over everyone.

GM has provided us with a textbook case of bullshitery~ Would they have become too big blah blah if they hadn't bought up as much of their competition as they could? Ummmmm........ probably not. Because of GM's greedy desire to try and become a monopoly we've now lost Pontiac and Saturn and all the jobs that came along with manufacturing those cars. It would be nice if we could prevent this bullshit from happening in the first place without restricting prosperous growth. Perhaps strict regulations can take care of this shit mess, if they're enforced that is.

[Myk JL 1,731]

Or how about eliminating bail outs & let failing businesses fail...

[Ladywriter 7,783]

if only we could afford to do that....

[Myk JL 1,731]

if only we could afford to do that....

Its either that or the continuation of inflating money & risk everyone being poor due to the US Dollar being completley worthless.

[Ladywriter 7,783]

maybe after they audit the Fed they'll shut the fucker down