Retrospect

Fed Chair Bernanke has now added his support for new legislation giving the Treasury the power of take over failing major non-bank financial institutions and a set of tools, short of outright takeover, for limiting the risk they pose to the rest of the economy. What’s interesting in this discussion is that the advocates — Bernanke and Geithner — appear to be saying explicitly that had these powers existed last fall the Treasury could have and should have taken over AIG, rather than keeping it on life support and paying out all its obligations at full dollar value.