Panel OKs Fed audit, financial-failure fees

WASHINGTON - The House Financial Services Committee voted yesterday to assess fees on large financial institutions to cover the costs of failure by their peers. It also moved to require a sweeping congressional audit of the normally secretive Federal Reserve.

In a surprise, however, chairman Barney Frank (D., Mass.) delayed final action on a long-awaited regulatory-overhaul bill until after Thanksgiving. He said the 42-member Congressional Black Caucus requested the delay because it was "troubled by a lack of response to the economic situation."

Lawmakers have been pressing the Obama administration to take further steps to assist the unemployed and create more jobs.

The votes on fees and on the Fed audit were the final modifications to the bill before the committee wraps up its work and sends the legislation to the full House. A vote there is expected next month.

The Senate Banking Committee began its own rewrite of the rules that govern Wall Street yesterday, and Treasury Secretary Timothy Geithner prodded Congress to move quickly.

In seeking to have large firms pay up-front fees for dismantling failing nonbank financial institutions, the House committee rejected a warning from the Obama administration and objections from Wall Street.

The money would be paid into a $150 billion "dissolution fund" by firms with assets of more than $50 billion. Hedge funds with assets of more than $10 billion also would have to pay.

The Federal Deposit Insurance Corp. would use the fund to unravel and break up collapsing nonbank financial firms. The FDIC already has authority to wind down banks.

Geithner and Wall Street prefer that the fee be assessed after a failed firm has been dismantled. Such a step, however, could require up-front payment by taxpayers.

"This amendment will end taxpayer-financed bailouts, eliminate 'too big to fail' [firms], and will create a system going forward where we force the big-bank Wall Street fat cats to pay [for] any mess they make," said Rep. Luis Gutierrez (D., Ill).

On auditing the Fed, the committee adopted a plan by Rep. Ron Paul (R., Texas) that had the support of a bipartisan roster of more than 300 members of Congress. It would give the Government Accountability Office the authority to audit the entirety of the Fed's balance sheet, credit facilities, and all securities-purchase programs.

Critics, led by Frank and Rep. Melvin Watt (D., N.C.), argued that Paul's proposal was too intrusive and could indirectly lead to higher interest rates. They proposed a more limited audit.

Addressing the government bailouts at a Joint Economic Committee hearing yesterday, Geithner said that the $700 billion program would end "as soon as we can," and that part of it will be used to lower the soaring federal debt.

During the sometimes-contentious session, which included one lawmaker calling on him to resign, Geithner was pressed to disclose the administration's plan for dealing with the unpopular financial-rescue program.

"We are winding it down," he said of the Troubled Asset Relief Program. Congress approved TARP at the height of the financial crisis in October 2008 as a way to supply banks with fresh capital.