US lawmaker favors curbing size of financial firms

November 3, 2009

WASHINGTON, Nov. 3 (Reuters) – The government should have the authority to break up or reconstruct financial firms before they become “too big to fail,” a prominent U.S. lawmaker said on Tuesday.

The House Financial Services Committee is expected to start crafting legislation this week that would give the government a way to see all aspects of the financial system and unwind large troubled financial firms.

Paul Kanjorski, chairman of the financial services subcommittee on capital markets, said he would soon introduce an amendment to the draft bill to prevent firms from becoming a threat to the wider economy.

Kanjorski said financial firms should be reconstructed or broken up before they become a threat to the economy.

“We have to find a way of limiting firms from becoming
too big to fail so they don’t capture the government,” he told reporters.

In London, some financial firms that were propped up by the government will be partially broken up. Royal Bank of Scotland was forced to sell chunks of its retail bank to meet European state aid rules. Lloyds Banking Group will have to dispose of a retail banking business with at least 600 branches.
(Reporting by Rachelle Younglai; editing by John Wallace) (( + 1 202 898 8411))

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