New "too big to fail" strategy

Obama goes public with a new approach

After the US financial sector received widespread criticism for its "too big to fail" attitude, the Obama administration is set to go public with a new approach that deals with the companies still harbouring this dangerous sentiment.

The new strategy would make it far easier for the government to seize control of them and make major changes, reports Reuters.

Announced today, the strategy would apparently make it easier for the government to oust managers, "wipe out shareholders and restructure the firm's outstanding loans," the official said.

Troubled financial firms

"In the coming days, the president will send a letter to Chairman Dodd and Chairman Frank setting out principles to guide the process," the official added, referring to House of Representatives Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd.

The Federal Deposit Insurance Corp. is there to help set policy for dealing with troubled financial firms under the White House plan, and would have authority to unwind large firms whose failure could threaten the overall economy, according to CNBC television.

In order for financial regulations to be sufficiently reformed, this "resolution authority" is vital.

President Obama is desperate to avoid making the same errors as the Bush administration in its attempts to address the crisis in 2008, where policies were frantic, confused and of kept from the public, leading to distrust among the electorate.

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