Another AIG-Style Fed Bailout Is About to Become Less Likely
- Emergency lending rule reflects tug-of-war with Congress
- Yellen reluctant to cede rescue flexibility in case of crisis
After the Fed released an initial proposal almost two years ago, a bipartisan group of lawmakers including Democratic Senator Elizabeth Warren complained that it didn’t go far enough.
Photographer: Andrew Harrer/BloombergThis article is for subscribers only.
The Federal Reserve is on the verge of relinquishing the tools it used to rescue American International Group Inc. and Bear Stearns Cos. That probably won’t appease lawmakers who’ve said they’re still concerned the central bank might abuse its powers as the lender of last resort.
The Fed is required to write rules that eliminate some of its sweeping emergency lending authority and plans to complete the long-delayed regulations by the end of this month. The measure stems from the 2010 Dodd-Frank law, which limited the Fed’s ability to prop up banks.