Sun editorial:

Too big to fail?

Large financial companies that helped cause the crash should face further regulation

Thursday, Oct. 29, 2009 | 2:06 a.m.

Rep. Barney Frank, chairman of the House Financial Services Committee, released a plan Tuesday to try to rein in the huge Wall Street companies that once were labeled “too big to fail.”

Frank, D-Mass., has proposed creating a council of federal regulators to monitor companies that could pull down the economy if they fail. Under the plan, the federal government could move to save or dismantle a company if it sees signs of imminent trouble.

The proposal, which has the support of the Obama administration, also seeks to limit future federal bailouts. Companies with more than $10 billion in assets would foot the bill for the government’s effort to save or dismantle one of their peers.

Under the plan, which is expected to be discussed today in Frank’s committee, the nation’s largest companies would have to keep more money in reserve, plan for how they would dismantle themselves in a crisis, and find it more difficult to take on heavy debt.

In a letter to members of his committee, Frank said there is a belief among financial executives that the government will save the behemoth companies and that “creates a perverse incentive for large firms to take reckless risks.”

It is understandable to see how that belief was created, given the impact the companies had on the market and the extraordinary lengths the federal government has gone to keep companies such as AIG, Citigroup and Bank of America solvent.

Frank’s proposal is sure to run into trouble with conservatives and libertarians. However, they should remember that the nation’s economy is suffering because some of these large companies took too many foolish risks, a situation exacerbated by the lack of enough government oversight and regulation.

There are still many details to be fleshed out regarding Frank’s plan, but it is definitely headed in the right direction. The national economic crisis demands that Congress take action to prevent another dire situation.

Discussion: 12 comments so far…

By Future

10/29/09 at 2:22 a.m.

Suggest removal

Too Big Too Fail Senator Harry Reid'm and Weep.

"Frank, D-Mass., has proposed creating a council of federal regulators to monitor companies that could pull down the economy if they fail."

First they need to monitor the inept Congress lead by Harry and Nancy

Congress should fix themselves before throwing stones
By dwms

10/29/09 at 3:12 a.m.

Suggest removal

Clark County's liability insurer AIG became AIU Holdings became Chartis within months. As a result, catastrophic claims, known as "debt", were covertly delegated to the new carriers.

The new carriers are arguing a defense.

Additional claims are resulting due to the resulting negligence.

AIG cannot pay back the bailout money because of their malpractices in handling insurance claims.
By Phargo

10/29/09 at 6:53 a.m.

Suggest removal

This is just smoke and mirrors. Barney Frank and Christopher Dodd were engineers of the Fanny and Freddy messes. Neither one qualifies as financial experts. Barney should go frank himself.
By KillerB

10/29/09 at 7:36 a.m.

Suggest removal

The feds aren't really interested in regulating Big Finance. They've been doing it since at least 1863's National Bank Act and still can't seem to know what's really happening. If they were they'd put Elizabeth Warren in charge -- she knows what's really up, but as chair of TARP's oversight committee she's hamstrung by not having any real power to do anything but look and comment.

Check it out -- http://www.businessinsider.com/henry-blo...
By rusty57

10/29/09 at 7:49 a.m.

Suggest removal

Coming up next: Fannie Med!

Barney did such a swell job with Fannie&Freddie, we should just annoint him "CEO for Life".
By KillerB

10/29/09 at 8:08 a.m.

Suggest removal

Phargo -- frank you!

Good post -- it's a concise bit on what happens when Washington, D.C., tries to do what only private enterprise should be doing. What a disaster.
By POWERPLAY

10/29/09 at 9:19 a.m.

Suggest removal

Congress telling people how to run a business or how to conduct there lives: Those 535 pigs can't even help themselfs and should stay out of the peoples business as much as possible. We the people say NO to this back door intursion into are lives. TO THE 535 LOSERS ON CAPITOL HILL TAKE YOUR SOCIALISM AND LEAVE THE COUNTRY AND DON'T COME BACK!
By Patrick_R_Gibbons

10/29/09 at 9:34 a.m.

Suggest removal

Bad regulations and bad government policies (like the moral hazard that bailed them out) got them into this mess. More regulation won't solve our problem.
By Phargo

10/29/09 at 10:21 a.m.

Suggest removal

Alan Greenspan was a proponent of no regulation. Then the big bust came. Then he admitted in public that he was wrong. He and Rubin belly bumped Brooksley Born out of government and she was the only one that saw the mess coming. All under Clinton's watch. You could look it up.
We need regulations for bankers and insurance companies. They are the ones that franked up the whole deal. The derivatives that they sell each other are totally w/o regulation as they are not really insurance policies, but they are sold as such.
By Patrick_R_Gibbons

10/29/09 at 2:49 p.m.

Suggest removal

Wrong, they created those things to reduce the risk that was being created by government incentives - easy money, threats, subsidies, and likely bailouts in case of failure.
By Phargo

10/29/09 at 4:07 p.m.

Suggest removal

you are picking fly poop out of pepper.
By larry5

10/29/09 at 7:17 p.m.

Suggest removal

Don't you just love it when our congress decides to tell another entity how to manage it's finances?

Reid, Pelosi, Frank, Dodd and many others belong in prison. They have stolen from us, they have lied to us, they have abused the trust they have been given. Why is this inept group of morons allowed to continue to legislate?