Corker warns financial overhaul could codify government's bailout powers

A key senator on Thursday cautioned that the financial overhaul bill could codify the government's ability to bail out companies.

Sen. Bob Corker (R-Tenn.) said the Treasury Department is urging senators to give it more borrowing power in financial overhaul legislation to deal with future financial failures.

"Treasury continues to push for borrowing abilities that basically legitimate the ability to do whatever they wish to solve these. That's something this country needs to be careful of," Corker said at a Pew forum, adding that Congress should not abdicate such power.

"What we do not want to do is create a situation where in essence, by virtue of a couple clauses in a bill, you've really given Treasury the ability to codify TARP," Corker said. The Troubled Asset Relief Program (TARP) is the formal name of the $700 billion rescue package passed by Congress in 2008.

"Treasury is working with the whole committee to make sure government has the ability it needs to wind down big firms and end 'too big to fail,' " said Andrew Williams, Treasury Department spokesman. "This is NOT about Treasury power — quite the opposite."

Corker and Sen. Mark Warner (D-Va.) are working on an aspect of the overhaul bill, released on Monday by Senate Banking Committee Chairman Chris Dodd (D-Conn.), that attempts to prevent future taxpayer-funded bailouts of financial firms. Corker and Warner favor a system in which bankruptcy is the default and a resolution system is a last resort. The Senate bill includes a $50 billion industry-supported fund overseen by the Federal Deposit Insurance Corporation (FDIC).

Corker said the Senate Judiciary Committee would need to work on the overhaul legislation to beef up the bankruptcy provisions. "Judiciary has to work with us to get things just right," Corker said.