A bipartisan group of U.S. lawmakers on Monday urged the Federal Reserve to restrict its crisis lending programs for big banks, which were criticized as bailouts during the 2007-2009 meltdown.
During the crisis, the Fed invoked its emergency lending powers to pump cash into Citigroup, Morgan Stanley and other banks to prevent the global panic from worsening. The 2010 Dodd-Frank law, enacted by Congress to crack down on Wall Street excesses, curtailed those powers. It instructed the Fed to provide emergency loans as a broad program, not to individual banks, and blocked it from lending to insolvent firms.
Fifteen lawmakers from both political parties and both houses of Congress said on Monday that the Fed has not done enough on its own to adequately limit its crisis lending powers. “If the board’s emergency lending authority is left unchecked, it can once again be used to provide massive bailouts to large financial institutions without any congressional action,” they said in a letter to Fed Chair Janet Yellen.