WASHINGTON — The American Bankers Association offered its own take Tuesday for how the government should unwind systemically large firms.
While the plan resembles an earlier proposal from the group, the ABA appears to have refined its approach. For example, the previous plan argued that the Federal Deposit Insurance Corp. should be kept largely separate from the resolution process for nonbank firms. But the latest plan gives the FDIC a key role in carrying out resolutions.
Under the plan, the president would have the ultimate authority to trigger the seizure of a systemic firm, acting on the recommendations of several government bodies, including the Treasury Department. The resolution would be handled by a special agency, staffed and overseen by the FDIC. In good times, the new "systemic resolution agency" would be in name only, with just "standby staff," but could be launched quickly once a firm failed.
"The FDIC would be given the role of running the SRA, but it would be kept separate from the FDIC to avoid public confusion with FDIC insurance" for bank depositors, the ABA said.
In April, ABA Chief Executive Edward Yingling expressed concerns in a letter to Geithner about a then-Treasury proposal to grant the FDIC the new authority, saying the agency's traditional deposit insurance role should not be disturbed, and a new agency should be established with oversight from the Treasury and other regulators.
In July, the Treasury proposed it be granted authority to appoint either the FDIC or the Securities and Exchange Commission — depending on the type of company — as the conservator or receiver for a failed systemic firm.
Wayne Abernathy, the ABA's executive director for financial institutions policy, said the trade group had not changed course, but rather developed a more "explicit" position on how different agencies should carry out their roles. "The principle remains consistent throughout that this needs to be an operation of the Treasury and the other parties that are part of the systemic risk organization, rather than an FDIC operation," he said.
