FDIC Chief Calls For 'systemic Risk Council'

MARCY GORDON

WASHINGTON (AP) — The head of the Federal Deposit Insurance Corp. says new powers are needed to oversee companies that pose financial risks to the economy, an authority that could be shared by the FDIC and other regulators.

Policymakers want to replace the "too big to fail" model used by the government as it rushed in to rescue huge financial institutions caught up in the global crisis last fall.

"Our current system has clearly failed in many instances to manage risk properly and to provide stability," FDIC Chairman Sheila Bair told the Senate Banking Committee Wednesday. "We're talking about a resolution and not a bailout."

And Bair's suggestion for new authority from Congress for the FDIC to take over and resolve bank and thrift holding companies — before the overall revamp of financial rules is finished — brought a sympathetic response from some senators.

Scores of bank holding companies, such as Citigroup Inc. and Bank of America Corp., fall under the supervision of the Federal Reserve. The FDIC now can take over and resolve only the subsidiaries of bank holding companies that take federally insured deposits.