The fed waived the right to save large companies from bankruptcy

The fed waived the right to save large companies from bankruptcy


The American Central Bank has left himself wide on the right programs to support entire sectors of the economy. Congress suggested the fed to abandon broad powers within the law, adopted five years ago.

WASHINGTON, 1 Dec. Alexey Bogdanovsky. The Board of governors of the Federal reserve system unanimously refused on Monday from rights of the American Central Bank to save large companies from bankruptcy, they had spent around 2 trillion dollars during the financial crisis of 2008.

While the fed left itself wide on the right programs to support entire sectors of the economy, reports the associated Press. “Emergency lending is an important tool that can be used in times of crisis for easing exceptional pressure on the financial markets, which could have profoundly negative consequences for households, businesses and the U.S. economy”, — said the head of the fed Janet Yellen before the Council meeting.

Congress suggested the fed to abandon broad powers within the law, adopted five years ago. Doctirine loans the fed then went to “rescue” a large, so-called systemic banks and the giant insurance Corporation AIG.

Congress in 2010 passed a law calling for the fed to change its rules so that not to help private firms during the crisis. The new rules come into force from January 2016. Opponents of aid to private companies by the Central Bank declare that it creates unfair conditions of competition. In addition, the former shareholders of AIG sued the government for what it has received control over 80% of AIG without compensation to the shareholders. The lawyers of the authorities stated that, since the insurance company is de facto bankrupt, its shareholders should not receive compensation, and loans were made to save the insurance market from collapsing. As a result, the shareholders have achieved a formal victory in court, but the compensation they received.