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  • Carpe What? Obama’s Plan to Seize Non-Banks

    Should the federal government have broad authority to seize private financial institutions on the verge of collapse to keep them from harming the economy? President Obama and his treasury secretary, Timothy Geithner, are arguing just that – saying that such power would have eased problems associated with recent bailouts. “(It) is precisely because of the lack of this authority that the AIG situation has gotten worse,” Obama said in a press conference on Tuesday.

    They do have a point. In any sector of the economy, failure should be an option. That means we need effective and workable ways to wind down institutions in an orderly way, without unnecessary collateral damage to the economy. And it’s not clear that current bankruptcy laws or other existing mechanisms do that.

    The Administration has seized on seizure as the answer. The Obama proposal – released this morning by the Treasury Department — provides for the seizure of failing financial institutions by the Federal Deposit Insurance Corporation (FDIC), as authorized under an elaborate process involving the Federal Reserve, Treasury Department, the FDIC itself and other financial regulators. The system is meant to parallel the existing authority of the FDIC to seize institutions that it insures. But the proposal raises a raft of dangers. For instance:

    - Seizure power would extend to a broad array of financial companies, apparently including private hedge funds as well as bank holding companies.
    - Seizure could be ordered whenever an institution is “in danger of becoming insolvent” and the failure would have “serious adverse effects on financial stability or economic conditions in the United States.” But how is “serious adverse effects” to be defined? Are we talking a financial collapse? Substantial job losses? Stock market losses?
    - Specific authorization is made for financial assistance to the seized companies, indicating that rather than provide a way to avoid future bailouts, the proposal will facilitate them.
    - Appeal to the courts is limited, as the legislation provides: “no court may take any action to restrain or affect the exercise of powers or functions of the conservator or receiver hereunder” (although the initial seizure decision may be appealed).

    Any legislation allowing the government to seize private property is inherently dangerous – even more so when done in a rushed manner and under the banner of “emergency.” Certainly, policymakers need to address problems in current law that may be making it too difficult to close down failed institutions. But they should do so deliberatively and cautiously, building on the bankruptcy process to the extent possible. A hurried and dangerous grant of seizure power to Washington is not the answer.

    Posted in Economics [slideshow_deploy]

    18 Responses to Carpe What? Obama’s Plan to Seize Non-Banks

    1. Ruth Trowbridge, Ama says:

      Seizure of private institutions, financial or otherwise, is entirely too much and unsafe government power. IMO the intention behind it is the abuse of the power.

    2. Arnie Rosner, Founta says:

      So if I am having a bad month I can depend on the boys in black to take over my business? So who will determine if I am in a position that is considered as failing? These guys have trouble just keeping their campaign promises.

      What assurances do I have that Geithner might miss the call on the basis of an "honest" mistake?

      Like I recently said, this is all a rouse just to grab the power before the bottom drops out!

    3. Sundowner04, TN says:

      Oh I don't know why they shouldn't be allowed to…the goverment has done such a wonderful job with everything else they have touched.

      (Note dripping sarcasm here)

      Fear the administration! They must be stopped now!

    4. Keith somewhere in t says:


      We lost the election, now we pay the price. Identify and groom your candidates, then develop you campaign strategies to win the next election. Then we may get change we can believe in.

    5. mike demas says:

      This "Cool Dude" and his band of Raiders in the White House scare the hell out of me. Never in all of my 74 years have I ever witnessed anything like this "Smash and Grab" style of politics. He is arrogant and a liar when it comes to what he says he will do and what he does!!!!

      BO HAS TO GO!

    6. mike baker Dallas Ce says:

      The shattered pieces of AIG that had any value would have been bought up by smaller companies. The dross wouldn't have infected the world's economy as badly as the big government cure.

    7. will san antonio says:

      seizure of private property—how is this even a conversation

    8. Dennis, Idaho says:

      -I repeat — He is an illegal alien. Born in Kenya adopted and naturalized in Indonesia. If he can grab enough power and destroy enough of our economy he and his cohorts can enslave this nation. His role model appears to be Hitler. At least he is following much of the pattern of cause problems then blame someone else and have his government solution.


    9. Tim AZ says:

      I say we insure that there are no re-elections in the house and senate all new reps. in 2010. Then we can have some fun with Obummers last two years in the oval office. Send him every bit of legislation possible to repeal everything he has signed into law including his executive oders. And then repeat them every month for his next two years. Then we will find out just how cool and cold he realy is. Thats change he could go insane with.

    10. Sharon Schulling; Ma says:

      I am a nurse practitioner and an educator of nurse practitioners. I will be passing this article on to all of my colleagues and co-workers.

      While I can't speak for the others, if it comes to the point of acquiescing to these strong arm tactics by President Obama and his minions or following my conscience, I will follow my conscience…even if my job is in peril.

    11. John Georgetown, Tex says:

      The Constitution forbids government from the taking of private property. I guess that doesn't matter to this current Congress. I just wonder how many Congressmen have actually read the Constitution? A Government granting its self the authority to seize private property is dangerous and a slippery slope to State controlled society. That is what Chevez and Castro has done. Dangerous, Dangerous.

    12. Al, The Villages, Fl says:

      How long with this socialist nonsense before the States need to secede? I wonder how many nitwits in this nation are fine with what is going on?

    13. Lynn B. DeSpain says:

      The Constitution has no meaning at all to Mr. Obama nor any of his Administration. Mr. Obama beieves that we are a Democracy, not a Republic. Mr. Obama believes that the Government built this Nation, not its people and the private sector.

      Mr. Obama believes that He knows what is best for everyone, even if it destroys them while saving them.

      Mr. Obama believes himself to be God on Earth. Maybe so, but he ain't my God! And he ani't my idea of an American

      An American is someone who knows that he has the right to risk his all on sucess or failure, but its all his own either way because he is the one who sweated for it.

      An American never goes down on bended knee to an agressor an says,"What can we do to make it all better?"

      An American never tells one neighbor that they have too much and to give half of it to his other neighbor, because that one is to lazy to get out and work!

      An American does not run around and sue everyone and everything at the drop of a hat just because he screwed up.

      An American can and will admit when they are wrong and promtly do something about it.

      An American knows that the Constitution is there to limit Governement, not the people.

      An American knows that this Country is Fifty Independent Nations joined under a Common Charter called the Constitution.

      An American knows the he has more rights under the Constitution than any member of Congres or even the President, because they work for him.


    14. Marshall Hill MI. says:

      We can see and read that Obama is our only answer,

      instead of GOD and FREEDOM and FAMILY!

    15. Pingback: Obama to Ensure Constitutional USA Does Not Return « Truth11

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