Washington: The US has unveiled new draft
regulatory measures which aim to ensure that stakeholders, not
tax payers would share the losses in case of big failure of
financial institutions.
Seeking to put in place stricter norms for big entities
that pose a threat to the whole system, the Obama
Administration has also proposed setting up financial services
oversight council.
"Large, highly complex financial companies that fail will
do so in an orderly and controlled manner, ensuring that
shareholders and unsecured creditors bear the losses, not
taxpayers...," according to a draft legislation by the House
Financial Services Committee and the Treasury Department.
Rattled by the ravaging financial turmoil, many large
American companies especially those in the financial sector,
had to be rescued by the Federal government with taxpayers'
money worth billions of dollars.
The legislation asserted that authorities would follow
the "polluters pays model where the financial industry has to
pay for their mistakes -- not taxpayers".
To strength the regulatory framework, the proposed bill
would ensure that there is proper communication and
co-ordination among various regulators.
Moreover, the US Federal Reserve would have "back-up
authority" to step in if regulators fail to act quickly to
address developing problems identified by the council.
Bureau Report
First Published: Wednesday, October 28, 2009, 21:41