Too big to fail policy must align globally: official
NEW YORK (Reuters) - The proposed U.S. financial resolution authority, which would empower the government to deal with large, failing financial firms, must keep a level playing field internationally, a key U.S. Treasury Department official said on Wednesday.
There must be " a recognition that we have to level the playing field as much as possible, as much as we can, in the international sphere," George Madison, who has been general counsel at Treasury since September, said in comments to a Practising Law Institute conference in New York.
While Madison said proposals related to the proposed authority are still "in flux" he said regulators should be "making sure U.S. institutions aren't treated too differently than foreign firms."
The resolution authority would deal with the "too big to fail" issue that plagued the Bush administration's efforts in 2008 to address crises at former Wall Street giants Lehman Brothers and Bear Stearns, as well as former mega-insurer American International Group (AIG.N).
"We didn't have the tools to do very much with Lehman, or poor AIG, frankly," Madison said at the conference.
Under a bill currently being considered by Congress, U.S. House of Representatives Financial Services Committee Chairman Barney Frank and the Obama administration have proposed that financial companies with more than $10 billion in assets would be assessed under the resolution authority program. As presented last week, the bill called for large financial firms to repay the Treasury Department on a case-by-case basis for Treasury loans used to finance government regulators' interventions to fix troubled financial firms, but Frank has recently said he can no longer support that funding approach.
The strategy is expected to make it easier for the government to oust managers, wipe out shareholders and restructure a firm's outstanding loans, in ways that may be faster moving than the Federal Deposit Insurance Corp's receivership authority or the current federal bankruptcy process.
(Reporting by Emily Chasan, editing by Dave Zimmerman)
