WASHINGTON (Reuters) – The U.S. Federal Reserve Board of Governors unveiled a proposal on Monday that would limit the scope of its authority to bail out a large financial company on the brink of collapse through its emergency-lending programs.
The Fed’s proposal would implement Dodd-Frank Wall Street that sought to prevent future big bailouts after the Fed extended more than $1 trillion in emergency credit during the height of the financial crisis.
Prior to the passage of the Dodd-Frank , the Fed had broader powers to extend emergency loans to “any individual, partnership or corporation” that met certain conditions.
Dodd-Frank limits this authority to ensure that the Fed’s emergency lending program cannot be used to aid a failing financial company by helping it avert bankruptcy.
, the emergency lending system should only be used to help bolster liquidity to the financial system.
Monday’s proposal also requires the U.S. Treasury secretary…
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