US govt urged to curb size of finance firms

Two key US lawmakers endorsed the idea of the government restricting not just the risks taken by big financial firms, but also their sheer size, echoing proposals being heard in Europe.

The chairmen of two powerful US House of Representatives panels signaled a willingness among Democrats in Congress to assert regulatory power to break up large firms and prevent threats to economic stability from financial institutions becoming "too big to fail."

That could have major consequences for financial giants ranging from Goldman Sachs and JPMorgan Chase to Morgan Stanley and Bank of America, all prominent survivors of last year's financial crisis.

The views of House Financial Services Committee Chairman Barney Frank and capital markets subcommittee Chairman Paul Kanjorski will be crucial to the ongoing effort by the Obama administration to tighten bank and capital market regulation

A bill debated on Tuesday by Frank's committee would empower regulators to reduce the size of troubled financial firms, Frank told reporters after a committee work session.

Kanjorski said: "We have to find a way to limit them. ... We are preparing an amendment to give authority to reconstruct organizations that are determined to be too large to fail."

The Obama administration last week proposed asserting a new level of government power to manage the risk and size of financial firms, but Frank and Kanjorki's comments appeared to place a new emphasis on size itself.

Source:China Daily