Wednesday, April 18, 2012

Secretary Geithner Urges House Panel Not to Repeal Dodd-Frank Orderly Liquidation Title as Part of Budget Legislation

In a letter to House Financial Services Committee Chair Spencer Bachus (R-AL), Treasury Secretary Tim Geithner asked the Committee not to move forward with Budget Reconciliation legislation that would repeal Title II of the Dodd-Frank Act, which provides for the orderly liquidation of failed financial firms. The Secretary said that the legislation would undermine the government's ability to limit the damage that failed firms could cause in a future crisis by eliminating the authority to break up or unwind failing financial firms. Title II was designed to have no cost to the taxpayer over the long run, but rather ensure that the failed financial institution bears the cost.

On a separate point, the Secretary said that the derivatives legislation building in the House amending Title VII is at best premature as the SEC and CFTC continue adopting regulations. Since the House bills deal with issues under active regulatory consideration, reasoned the Secretary, enactment of the legislative changes would undermine the integrity of the rulemaking process, further complicate the work of the regulators and create uncertainty. The Secretary urged the Committee to allow the regulators to work their way through the rulemaking process.