According to U.S. Treasury Secretary Timothy Geithner, the Federal Reserve should lose its ability to bail out “big, failing financial firms like AIG and Bear Stearns.”

He said, “Any firm that puts itself in a position where it cannot survive without special assistance from the government must face the consequences of failure. The proposed resolution authority would not authorize the government to provide open bank assistance to any failing firm.” He went on, “We cannot put taxpayers in the position of paying for the losses of large private financial institutions. We must build a system in which individual firms, no matter how large or important, can fail without risking catastrophic damage to the economy.”

Many taxpayers would agree with Geithner, while many of the banks would likely not. I have to say that I do agree with him to a point definitely. With as much money as we, as American citizens, have invested in these companies, we should be able to control them a bit better than they are now (for example, we should definitely have been able to do something about the grossly overpaid executives at AIG). However, once we start controlling the companies, people start screaming about how it is not right in a free market system.

Geithner suggests that large firms that are failing should be received by the FDIC and then it can decide whether to “unwind, dismantle, sell or liquidate.” If these companies should so choose to liquidate, then they can be purchased by other companies or they can be broken into many other branches.

The main reason why I feel like this is such a good idea is that I think that companies should be held responsible for their actions. Like the picture posted above (which I know I posted as a funny post a week or so ago), these banks are allowed to steal and “plunder” and still be able to escape with all their loot. It is not the way a company is supposed to be run. These companies should have been forced to figure out a way to liquidate or sell from the beginning. Allowing them to continue to operate with the taxpayer’s money is absolutely insane. Particularly when you consider companies that took BILLIONS (like, AIG). Those companies will never be able to pay back that money.

At least when the government bailed out the car companies, there were hundreds of thousands of blue collar workers that were benefiting because they wouldn’t be losing their jobs. At the same time, the executives of those companies weren’t taking outrageous salaries either. It is as though the financial companies that took the bailout money do not run on the same system. It is just absolutely ridiculous how out of control the whole thing got.

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The finance chiefs from the G7 said yesterday that the worst of the recession of the global economy may be over. They also pledged to make sure that the big financial firms stick around.

Group of Seven finance ministers and central bankers said after a meeting that economic activity should begin to recover later this year. However, they said the outlook remained weak and there was a risk that the global economy may still worsen.

“We are right to be somewhat encouraged, but we would be wrong to conclude that we are close to emerging from the darkness that descended on the global economy early last fall,” U.S. Treasury Secretary Timothy Geithner said in a statement.

The news is good coming from G7 considering during their last gathering in February they said a severe downturn would go through most of 2009 and gave no mention of signs of stability.

The financial chiefs pledged to act “as needed to restore lending, provide liquidity support, inject capital into financial institutions, project savings and deposits and address impaired assets.”

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Some feared that the money recovered from Bernard Madoff’s “fortune” would go to the U.S. Treasury, but today it was announced that those jilted investors would be getting the money.

The SEC along with federal prosecutors filed papers separately with a federal judge to ask for all the money and assets be liquidated and given to the investors.

Honestly, Madoff won’t need the money because he’s facing 150 years in prison for the huge ponzi scheme he ran for a quarter century. He pled guilty last month to the charges and is sitting in prison right now waiting to be sentenced in June.

The news is obviously welcomed by those investors who trusted Madoff with their money. Some of the investors were ready to file for bankruptcy.

The SEC first filed papers Wednesday to calm investors who fear they need to initiate bankruptcy proceedings to protect their money. It said bankruptcy would create unnecessary confusion and cause costly and potentially wasteful litigation.

Later in the day, prosecutors filed their own arguments, saying the action brought April 1 by a half dozen investors “is premised on a fundamental misunderstanding of forfeiture and bankruptcy law.”

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