The Federal Reserve took the final step to ensure it can’t repeat the extraordinary measures taken to rescue American International Group Inc. and Bear Stearns Cos. in 2008, adopting formal restrictions on its ability to help failing financial firms, Bloomberg News reported yesterday. Under the revised authority approved in a 5-0 vote yesterday, the Fed would only be able to save firms in a broad-based scenario including at least five entities at the same time. The changes are designed to reflect Congress’ intention in the 2010 Dodd-Frank Act to prevent the central bank from bailing out individual companies. “The ability to engage in emergency lending through broad-based facilities to ensure liquidity in the financial system is a critical tool for responding to broad and unusual market stress,” Fed Chair Janet Yellen said before the vote. The final rule included “significant changes” reflecting public comments on an initial proposal the Fed released almost two years ago, Yellen said. That wasn’t enough to satisfy critics such as Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee. “Too big to fail is unfortunately alive and well, and this rule from the Federal Reserve doesn’t change that,” Jeb Hensarling said. “Vague rules and bureaucratic discretion are not the answer — they are the problem.”
