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The US economy is on the recovery track. Factories are recruiting part-time workers to replenish depleted inventory. The housing sector is also seeing some positive changes what with sales of new homes increasing.

Now the Federal government is also taking some steps to put the economy on the recovery track. US Treasury Secretary Tim Geithner and House Financial Service Committee chairman Barney Frank observe that the large financial houses will not be supported by the government. There is a fear that the Treasury implicitly protects the big financial houses like Lehman Brothers and AIG from collapse. Hence, these companies will benefit from the lower borrowing outlays as they enjoy the protection of the government.

However, Geithner says that there will not be any list of the top-ranking financial companies. The Federal government will supervise them closely and they will also need to operate under stringent capital requirements. Geithner says that the economy is heavily dependant on these large companies. It may be noted that a bankruptcy of these companies can eventually lead to a collapse of the financial system as it happened last year. These companies must have cushions of liquidity and sufficient capital which will help the companies to absorb losses. Frank also says jokingly that there will be death panels too implying the healthcare debate.

The move has been opposed by the Republicans. A Democrat from California, Brad Sherman, says that the administration should limit itself to spending $1,000 billion at times when companies are being wound up. He also made the comment that the move will put the smaller companies in a disadvantageous position.

Sherman says that the Wall Street feels that the executive branch should have more power. This could mean that the medium-sized institution is up against competition from the large financial companies who are enjoying government protection.

Congress members from rural constituencies say that they have been pressurized by small banks. These banks are saying that they are facing a threat from the proposed Consumer Financial Protection Agency. It’s time that something be done about it.

Frank has proposed that the certain changes in the CFPA. This will make the bill more acceptable to his committee members. The members want a particular section to be removed that requires lenders to offer vanilla versions of products like mortgages and credit cards. Franks has also criticized the Federal government’s consumer protection credentials. The Federal Deposit Corporation has also been criticized.

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