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Economic Outlook: Clash of Titans
Addressing the House Financial Services Committee just hours apart, Treasury Secretary Timothy Geithner and Federal Deposit Insurance Corp. Chairwoman Sheila Bair offered conflicting testimony on key portions of the Treasury Department's reform initiatives.
When the next crisis comes down the line, Geithner said, large financial firms should expect to pay for any government interventions needed to rescue one of their own. However, he said, the funds for the intervention would be collected after the failure over a period of time.
Regulatory reform in the Treasury plan calls for a council made up of regulators from various agencies to be chaired by the Treasury Secretary.
Hours after Geithner spoke, Bair said a council of regulators "lacks sufficient authority to effectively address systemic risks," The New York Times reported Thursday. Bair said an inter-agency regulatory council should not be lead by the Treasury Secretary but by an independent leader.
She said a fund that is paid for in advance of a financial firm's collapse has the advantage of allowing "all firms" to contribute to the fund, "not just survivors."
Geithner said a fund established in advance of a failure would encourage risky behavior at banks that were aware there was a collective rescue fund held in reserve.
Not everyone read the proposals as protection for taxpayers.
"Even a cursory reading shows that the administration has chosen to continue its failed policy of costly taxpayer bailouts orchestrated behind closed doors by officials at the Treasury and the Federal Reserve," Rep. Spencer Bachus, R-Ala., the senior Republican on the panel, said.
While it looks as though it will take a few skirmishes to figure out the future, U.S. markets surged Thursday after the Commerce Department said the gross domestic product rose 3.5 percent in the third quarter.
It was better than expected by 0.3 percentage points and gave strong signal the Great Recession, the longest recession since the Great Depression, had come to an end.
President Barack Obama called the report "welcome" news. But the president added there were other benchmarks to consider, such as "whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well."
Copyright 2009 by United Press International
This news arrived on: 10/30/2009
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Posted Comments:
11-01-2009 11:11
1/2d wrote:
"Too big to fail"
No entity should ever be considered "too big to fail", as it leaves no incentive for the entity to act responsibly. The government is also partly to blame for this problem, for it should never let any entity get that much control over any faction of our
economy. I don't believe any one entity should be allowed to control more than about 30% of any field.
That encourages monopolistic attitudes and does nothing to help t5he country, it only encourages greed. 1/2d
economy. I don't believe any one entity should be allowed to control more than about 30% of any field.
That encourages monopolistic attitudes and does nothing to help t5he country, it only encourages greed. 1/2d
11-01-2009 08:26
Redneck Again! wrote:
Ig-in-or-runt ??
Being only a redneck! I always thought that gross national product was created by industry and agriculture! Not fictious trading of imaginary finantial pieces of paper! Trading on the stockmarket is no indication of prosperity! It's only a game for the insiders--stealing money without having to do anything for it! Encourage the working class to "invest" and then fleece them! Conspire with their pension and insurance holders to "invest" then steal that too! And last of all---Lawyers sueing each other is NOT GNP!
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