* Bair: proposal to break up big banks "well-intentioned"
* Warns Congress must be mindful of bank safety, soundness
By Karey Wutkowski
WASHINGTON, Nov 24 A top U.S. bank regulator on
Tuesday said lawmakers need to be careful about moving forward
with a proposal that could break up the largest financial
institutions, while also voicing support for its objective.
Sheila Bair, chairman of the Federal Deposit Insurance
Corp, said the proposal from Democratic Representative Paul
Kanjorski is "a well-intentioned amendment."
Kanjorski, whose amendment got approved by a House of
Representatives committee last week as part of a bigger
financial reform bill, has proposed giving the government power
to break up financial firms that could threaten financial
stability, even if they appear healthy.
"We share the same goal of ending 'too big to fail' and
making sure that institutions cannot imperil the broader
economy," Bair told reporters during the FDIC's quarterly bank
But she also cautioned, "We need to be careful. I think
there is a safety and soundness issue."
Bair has been a vocal advocate of ending notions that some
financial institutions are too big to fail, and that the
government will bail them out if they become insolvent.
Her opinions are influential with lawmakers, who have
lauded her for issuing early warnings about subprime loans and
for pushing aggressively for mortgage modifications.
She stopped short of giving outright support to Kanjorski's
amendment. International regulators are looking at similar
proposals, and European Union officials have said they will
turn the spotlight on 28 European banks bailed out by
governments for possible mandated divestitures.
The Obama administration and congressional Democrats want a
new way to handle failing firms. The goal is to prevent another
debacle like last year's, when Lehman Brothers collapsed,
triggering a credit crisis, and taxpayers bailed out AIG
(AIG.N), Citigroup (C.N), Bank of America (BAC.N) and others.
Bair has called for economic disincentives, such as higher
capital requirements and fees paid into a resolution fund to
dismantle failing financial giants. The idea is that those
costs would discourage firms from getting too big to fail.
Kanjorski's amendment is part of a massive financial
overhaul plan from Democrats that also calls for a new consumer
agency to police financial products, enhanced oversight of
derivatives, and a controversial measure to open the Federal
Reserve's monetary policy decisions to government audits.
A full House vote on the bill is not expected until the
second week of December at the earliest. Independent Senator
Bernie Sanders has proposed similar bank break up legislation,
but that bill has not attracted wide support in the Senate.
(Reporting by Karey Wutkowski; Editing by Tim Dobbyn)
((E-mail:firstname.lastname@example.org +1 202 898 8374))