Feb. 21 (UPI) -- The U.S. Treasury said Wednesday it recommends keeping the federal government's power to seize and dismantle failing financial firms during a crisis, an Obama-era rule implemented after the financial crisis.
The Treasury said its recommendations ensure taxpayers are protected by strengthening the bankruptcy procedure for failed financial companies.
According to the report, the Orderly Liquidation Authority will be used in very limited circumstances as an "emergency tool."
"Recommendations seek to ensure that our financial system is resilient while protecting taxpayers and promoting market discipline," Treasury Secretary Steven Mnuchin said.
On multiple occasions before the 2008-10 financial crisis, the federal government moved to bail out failing firms that were deemed "too large to fail."
"The bankruptcy reforms that we propose will make the shareholders, management, and creditors of a financial company bear any losses from its failure. The policy of this administration is clear: we will not tolerate taxpayer-funded bailouts," Mnuchin said.
The Dodd-Frank act gave the Federal Deposit Insurance Corp., the Federal Reserve and the Treasury secretary the authority to resolve complex financial firms in ways similar to its resolution of deposit-taking banks.
The report recommended changes to the bankruptcy code to make it easier for financial failures to be resolved in bankruptcy court without the government taking over.
The Treasury report also advised eliminating the FDIC's authority to treat similarly situated creditors differently on an ad hoc basis, and imposing a backstop as soon as reasonably possible if an Orderly Liquidation Fund loan is not repaid.