Nothing like giving the guv’mint the right to say “Okay, you’re fucking up, so we’re gonna shut you down and sell you off …”
The government’s top financial regulators are channeling widespread outrage over retention bonuses at American International Group Inc. to quickly win authority they have sought for much of the past year to seize nonbank companies and freeze their contracts.
The House Financial Services Committee plans to vote as early as next week on legislation that would give the government that authority. Federal officials already has such power over banks. The Obama administration is pushing for fast action on the issue, even before Congress tackles a broader overhaul of financial regulation.
Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, in congressional testimony Tuesday, said the lack of authority to seize AIG — the way the Federal Deposit Insurance Corp. places failing banks into so-called receivership — forced the government into the position of owning almost 80% of the insurance giant, and serving as its major lender, while lacking the power to stop multimillion-dollar bonus contracts signed before the government intervention.
“If a federal agency had had such tools on Sept. 16, they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate,” Mr. Bernanke said.
While the power seems likely to be granted by Congress, it’s unclear which wing of the government would be given the authority. Mr. Geithner proposed that any emergency action be based on a determination by the Treasury secretary along with the Federal Reserve and the federal regulator overseeing the company.
He said that in addition to the power to seize a company, the proposed authority would give the government rights to sell or transfer assets or liabilities of the firm and renegotiate contracts, including those with employees.