how to deal with institutions that are so big that the government has no choice but to rescue them when they get in trouble.
A senior administration official said on Sunday that after extensive consultations with Treasury Department officials, Representative Barney Frank, the chairman of the House Financial Services Committee, would introduce legislation as early as this week. 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 official said the Treasury secretary, Timothy F. Geithner, was planning to endorse the changes in testimony before the House Financial Services Committee on Thursday.
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.
Trying to Rein In ‘Too Big to Fail’ Institutions - NYTimes.com
Sawickipedia: Thank goodness - I have no idea whether this proposal actually will work - but it’s about time that the current administration finally started realizing that too big to fail is and was one of the things that got us into this mess. Given the crony capitalism inherent in too big to fail I give this no shot of going anywhere if Congress has a say. <sigh>
