Below The Beltway

Today, Treasury Secretary Tim “Turbo Tax” Geithner proposed a vast increase in his Department’s power to take over American financial institutions:

Treasury Secretary Timothy F. Geithner today told Congress the administration will seek unprecedented power to seize non-bank financial companies whose collapse could jeopardize the economy, a move Geithner said would have allowed the government to bail out insurance giant American International Group at a far lower cost to taxpayers.

The government at present has the authority to seize only banks.

Allowing the Treasury Department to take over a broader range of companies, such as large insurers, investment firms and hedge funds, would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators.

“Our system permitted a scale of risk taking that has caused grave damage to the fortunes of all Americans,” Geithner said in testimony before the House Financial Services Committee. ” . . . We must create a new resolution authority so that the federal government has the tools it needs to unwind an institution of the size and complexity of AIG.”

(…)

[C]ommittee Chairman Rep. Barney Frank (D-Mass.) seemed inclined to support Geithner’s request, saying the government should have the same power over all financial services firms as the Federal Deposit Insurance Corporation does over banks.

“Banks also failed in 2008 . . . But the fact is that we have in place mechanisms . . . that contained the damage,” Frank said. ” . . . We need to give somebody, somewhere in the federal government. . . the power to do what the FDIC can do with banks.

Of course you do Barney, but as Kip Esquire points out, there really isn’t that much resemblance between what Geithner is proposing and the FDIC:

Whatever Geithner is seeking, it is not “like the FDIC.” The FDIC at least goes through the motions, however disingenuous, of being independent and voluntary. Geithner is simply slicing through the pretense and going straight to “a gun at your head and a contract on the table.”

Yes, but that’s because we don’t deal with the niceties here in Obama’s America.

By the way, Kip also gets a props-of-the-day award for best use of a Godfather analogy.