Sens. Warren and Vitter, and Congressmen Garrett and Capuano Lead Bipartisan, Bicameral Letter Urging Fed to Strengthen Restrictions on
During the financial crisis, the Fed invoked its emergency lending authority to provide over
"If the Board's emergency lending authority is left unchecked, it can once again be used to provide massive bailouts to large financial institutions without any congressional action," wrote the senators and representatives. "The Board's proposed rule fails to strike the appropriate balance between promoting financial stability and mitigating moral hazard among the largest financial institutions."
* The senators and representatives recommended that the Board:
* Establish a clear time limit for a financial institution's reliance on the Board's emergency lending.
* Establish procedures for the orderly unwinding of any emergency lending program.
* Adopt a broader definition of "insolvent."
* Expand the definition of "broad-based."
* Establish limitations, and a penalty rate, on lending terms.
Read the full text of the letter here (http://ct.symplicity.com/t/wrn/5f35ca498d37d85e14a463b75dbb0810/4066850105/realurl=http://www.warren.senate.gov/files/documents/2014-8-18%20Ltr%20to%20Fed%20re%20Emergency%20Lending%20Authority.pdf).
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