Warren, Vitter: Feds New Bailout Rule is a Step in the Right Direction
(Washington, D.C.) - U.S. Senators Elizabeth Warren (D-Mass.) and David Vitter (R-La.) members of the Senate Banking Committee, today released the following statements upon the Federal Reserve's adoption of a new rule limiting its ability to lend funds to financial institutions in crisis, also known as a "bailout."
"I'm glad the Fed incorporated many of the ideas from the bipartisan Bailout Prevention Act. These changes will help promote market discipline and make the financial system safer - but there are still loopholes that the Fed could exploit to provide another back-door bailout to giant financial institutions. It's up to Congress to close those loopholes and ensure that Fed emergency lending is limited to protecting the economy and not to saving a few favored banks," said Warren.
"American taxpayers should never be on the hook to bail out financial institutions who make unwise and risky bets," said Vitter. "I've spent years fighting to limit the emergency lending powers of the Fed, and today's announcement is the first real acknowledgement from the Fed that it needed to do more to curtail its own bailout authority. However, more needs to be done and I'll continue pushing strong responsible reforms protecting the tax dollars of hard-working Americans."
During the 2008 financial crisis, the Fed invoked its emergency lending authority to provide over $13 trillion in loans primarily to a select group of large financial institutions. These loans were long-term and offered at below-market rates - a bailout in all but name of institutions regarded as "Too Big to Fail."
In August 2014, Vitter and Warren led a group of 13 bipartisan legislators in sending a letter to the Fed asking it to strengthen their restrictions. Click here to read more.
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