WASHINGTON — President Barack Obama on Tuesday embraced a House bill that would give the government unprecedented power to seize bank- holding companies and other large financial firms teetering on the brink of collapse — and stick their competitors with the cost.
In a letter to House Financial Services Committee Chairman Barney Frank, Obama said the belief among financial executives that the government would ultimately protect them creates a “perverse incentive” for large firms to take reckless risks.
“Taxpayers simply must not be put in the position of paying for losses incurred by private institutions,” Obama wrote in the letter.
Frank has proposed creating a council of regulators to monitor financial firms regarded as so big and influential that their collapse could bring down the entire economy.
If the council determines that a firm has grown too big and dangerous, the Federal Reserve could step in to dismantle it.
A special fund, paid by assessments on financial companies with more than $10 billion in assets, would cover any outstanding costs of that action.
The Associated Press
