Treasury’s financial power play

The Obama team wants new authority to seize big banks and hedge funds—is it a power grab or prudent policy?

What happened

The Obama administration is proposing new financial oversight rules, including giving federal regulators greater oversight over “too large to fail” financial firms. Treasury Secretary Timothy Geithner also outlined a proposal Wednesday to allow Treasury and the FDIC to seize “systemically important” firms if their imminent collapse endangers the broader economy. (The Wall Street Journal)

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“After the AIG mess,” which these new powers could have prevented, said Justin Gardner in Donklephant, why not broaden his authority to include FDIC-like liquidation tools? It’s “crazy, crazy, crazy” that we let one firm do so much damage. We need to protect ourselves from another Lehman Brothers or AIG, “and, like it or not, the only way to do that is give the government more power.”

The Obama team’s plan may be a good one, said James Capretta in National Review Online, but the timing is lousy. Obama, rightfully, didn’t trust the pitchfork-wielding Congress to help it craft his bank bailout, and he would be “playing with fire” to let it write a law giving the Treasury “sweeping seizure authority” in this environment.