The Obama Administration tried to portray the plan as no big deal, akin to simply filling in a loophole. The idea was to provide the FDIC with authority to seize failing “non–banK” financial institutions such as holding companies, insurance firms and hedge funds, similar to the powers they already have to take over failing banks. Such power, it argued, is necessary to avoid disruptive failures of huge institutions, which could threaten the financial institution as a whole. In particular, the Administration pointed to the AIG debacle, saying that the proposed …
