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Bachus Asks Geithner…Again…To Explain Administration's Plan For Bailout Authority In Advance of Senate Consideration Of Financial Reform

WASHINGTON, April 23, 2010 -

- Financial Services Committee Ranking Member Spencer Bachus wrote to Treasury Secretary Tim Geithner for the second time in six months asking him to answer specific questions on how the bailout authority that the Obama Administration is advocating will work and how much money will be needed to "resolve" a failed non-bank.

"I asked you six months ago to answer how the ‘resolution authority' you have proposed would work as a practical matter, with specific reference to the Lehman failure.  As the Senate prepares to take up this proposal as part of regulatory reform, I am concerned that we are exactly where we were when the Administration first submitted its proposal for our consideration a year ago:  without any clear understanding of the costs of this new authority, or how it would be deployed in the event of a major financial institution's collapse."

Ranking Member Bachus first asked these questions of Secretary Geithner on October 29, 2009. No response has been received.  At a hearing earlier this week into the September 2008 failure of Lehman Brothers, after being asked to explain how much money would have been required to facilitate Lehman's orderly unwinding had the bailout authority the Administration is advocating for been in place, Secretary Geithner said it was an "unanswerable" question.  

In the letter to Secretary Geithner, Ranking Member Bachus said, "I am writing you to ask that you explain - in detail, using information that was available to the New York Federal Reserve Bank in September 2008 - how the ‘resolution authority' the Administration has proposed would have resolved Lehman Brothers in an orderly manner that would have, in your words, ‘maximized return to the taxpayer and minimized risk of losses for the system.'  Because Lehman Brothers has become the cornerstone on which arguments in favor of an open-ended government ‘resolution authority' have been grounded, the American people deserve to know how this authority would have addressed Lehman Brothers and at what cost.  And they deserve to have that information before Congress passes legislation granting the government these broad powers."

Click here to view a copy of the letter.

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