Congressman worried about permanent bailouts for banks

The Obama administration and congressional Democrats want to convert the Federal Reserve into a "permanent bailout authority," the Financial Services Committee's top Republican member warned Thursday.

Rep. Spencer Bachus (R-Ala.) warned that proposed reforms for regulations governing the financial industry would give the Fed too much power, and endlessly sustain the kind of bailouts first seen last fall.

"I don't think they were ever intended to use taxpayer dollars to prop up individual financial institutions," Bachus said of the Fed's proposed new role during an interview on Bloomberg News. "Unfortunately, the Democrats and the administration want to make them a permanent bailout authority."

The Alabama lawmaker, ranking member of the Financial Services Committee, said that the Fed was not sufficiently transparent or accountable to justify giving it new powers under a reformed regulatory regime.

"We think we ought to have an exit strategy, not permanently adopt a 'too big to fail' doctrine," he said.

Bachus indicated he preferred the Federal Deposit Insurance Corporation (FDIC) remain in charge of failed banks -- so that the troubled institutions be shut down, instead of sustained by taxpayer infusions.

"I think there is one regulator who decides who fails and who doesn't, and that's the market," he said. "And that's the American way of doing business."