Senator Shelby: Dodd Bill Doesn't Fix 'Too Big To Fail'


Alabama Senator Richard Shelby, the ranking Republican on the Senate Banking Committee, has written a letter to Treasury Secretary Tim Geithner voicing his opposition to the Dodd bill's approach to the problem of too-big-to-fail financial institutions, reports The New York Times.

In the letter, Senator Shelby argues that the bill still provides the Federal Reserve with lending powers and gives the FDIC and Treasury Department the authority to guarantee banks' debt during emergencies. And he took issue with the bill's proposed $50 billion fund designed to pay for the termination of failing banks: "The mere existence of this fund will make it all too easy to choose a bailout over bankruptcy," he wrote.

Altogether, these provisions amount to a "backdoor way" to bailouts, he said:

"[The Dodd bill] does not end the problem of 'too big to fail' and will not end the associated moral hazard."

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