"Too big to fail" in crosshairs of reform debate
A Democratic lawmaker and top bank regulator
Diamond Toolson Monday defended legislative efforts that they say would end the perception that some firms are "too big to fail," challenging Republican complaints about the financial reform bills.
The defense of the financial regulation overhaul moving through Congress comes as lawmakers are in the middle of a two-week recess. When they return next week, financial reform is expected to be the top legislative priority.
Before the recess started, Richard Shelby, the top Republican on the Senate Banking Committee, said a Democratic bill approved by the panel failed to end the "too big to fail" problem.
Representative Paul Kanjorski, a leading Democrat on the House Financial Services Committee, said on Monday the House bill would ensure no firm poses too much risk by giving regulators the power to proactively limit products or break up large financial firms, even before they get into trouble.
He predicted the Senate version would soon have a similar provision.
Also on Monday, Federal Deposit Insurance Corp Chairman Sheila Bair challenged opponents of the financial reform effort, saying that the bills give the FDIC the power it needs to orderly dismantle large failing firms.
She said "too big to fail" still exists today, giving large firms a funding advantage, and reform is needed quickly to end it.
"Misinformed criticisms of the legislation that simply serve to politicize, obfuscate or delay enactment will only perpetuate the favorable market funding these firms receive from their implicit government backing," Bair said in an editorial in the Wall Street Journal.
