Plan N Is Looking Like A Go

This news is the best I've seen all day.

The White House and Congress are rushing to write legislation that allows the federal government to take over and unwind the businesses of a large financial institution—such as AIG or Citigroup —the way it now can with commercial banks, CNBC has learned.

The regulatory authority—similar to the FDIC’s so-called bridge bank powers—was originally expected to be included in a broader reform package addressing systemic risk. But now it's being crafted as stand-alone legislation in the wake of the public uproar over the AIG executive bonuses.

The legislation, being spearheaded by House Financial Services Chairman Barney Frank (D-Mass.) could be ready for mark-up before Congress’ spring recess, which starts April 6, according to a senior Congressional staffer. A public hearing is also expected.

“The President has asked us to fast-track,” said the source. “Drafting is going on at both ends of Pennsylvania Avenue.”

The President Wednesday referred to the pressing need for such authority “get a proper mechanism in place,” adding he had discussed the issue with Rep Frank. It is unclear who is handling it on the Senate side, but it would presumably come under the portfolio of the Finance Committee, chaired by Chris Dodd (D-Conn.)

“What we are working on is a resolution authority that would be similar—not identical, but similar to the powers that the FDIC currently has over banks,” the President said in his comments about the AIG uproar.

FDIC Chairman Sheila Bair Thursday told Congress that the government’s policy of bailing out firms because they were too big to fail had to be replaced.

This is precisely the type of legislation needed to make Plan N a reality. I applaud the effort, for once it looks like both Obama and Congressional Democrats are taking this seriously. No more bailouts, go straight to nationalization, take the bad banks over and unwind them or break them up, and sell off the assets.

This is fantastic news, and getting this legislation on the President's desk ASAP will be the best thing for the country. Obama needs to turn around and have the FDIC use this authority and use it often. Take these bad banks and put them down.

Excellent, excellent news. It means Plan N is a go.