U.S. banks won't be rescued by taxpayers, U.S. TreasuryDepartment official Mary Miller said, rebutting investor skepticismthat some lenders are too large to be allowed to fail.
|“A common use of the too-big-to-fail shorthand is the notionthat the government will bail a company out if it is in danger ofcollapse because its failure would otherwise have too great anegative impact,” Miller, the Treasury's undersecretary fordomestic finance, said in remarks prepared for a speech in New Yorklate yesterday. “With respect to this understanding oftoo-big-to-fail, let me be very clear: It is wrong.”
|A debate from Washington to Wall Street over whether theDodd-Frank financial overhaul law ends bailouts was re-energizedafter U.S. Attorney General Eric Holder said last month that thesize of the largest banks has made it difficult for the JusticeDepartment to bring criminal charges when there is wrongdoing.
|“No financial institution, regardless of its size, will bebailed out by taxpayers again,” Miller said at a conference in NewYork. “Shareholders of failed companies will be wiped out;creditors will absorb losses; culpable management will not beretained and may have their compensation clawed back.”
|Miller said “the evidence is mixed” on whether large banks havelower borrowing costs because of the belief that the governmentwould bail them out if necessary.
|Miller also said the Financial Stability Oversight Council, agroup of regulators charged with preventing another financialcrisis, is “nearing the end of the process” to determine whether tosubject a group of non-bank companies to Federal Reservesupervision.
|American International Group Inc., Prudential Financial Inc. andGeneral Electric Co.'s finance unit have all said they are in thefinal stage of review by the council, or FSOC.
|Miller said on March 4 that the FSOC may vote “in the next fewmonths” on whether to designate some companies as systemicallyimportant, which puts them under Fed supervision.
|Bloomberg News
|Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.
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