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Geithner seeks new powers over financial companies

(Agencies)
Updated: 2009-03-24 23:59

AIG's decision to pay millions in bonuses has created a public relations headache for President Barack Obama at a time when he is trying to gin up public and political support for his economic policies, bank-rescue plan and overhaul of the nation's regulatory structure.

Related readings:  Obama won't let Geithner quit  Geithner tells AIG: It's payback time  Geithner rescue plan may be doomed  Geithner pressured over bailout

The FDIC-like powers being sought by Geithner would allow the treasury secretary to set up a conservatorship or receivership for a failing financial company. The government would have the power to take control of the firm and sell or transfer parts of it to reduce its risky position.

The secretary also would be allowed to make loans, buy assets, guarantee loans and make equity stakes to help stabilize the company. Importantly, Geithner said the government would have the power to "renegotiate or repudiate" a company's contracts, including those with its employees.

If such powers were in place last year, the government argues, it could have used them to better handle AIG and Bear Stearns, which were bailed out by the government, and Lehman Brothers, which wasn't rescued and was forced into bankruptcy.

Government bailouts of AIG, Citigroup Inc., Bank of America Corp. and others have put billions of taxpayers' dollars at risk over the past year and have angered the American public.

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