S&P: US banks bailout could happen once more

13 July 2011

Authorities in the US could bail out banks with the help of public money during the next financial crisis.

This is the opinion of Standard & Poor's, which claimed the Federal Reserve, Congress and the US Treasury might decide to come to the aid of a large financial group as opposed to letting it fail - such as happened with Lehman Brothers.

A research note from the ratings agency - which has been operating for more than 150 years - read: "We believe the government may try to avoid contagion and a domino effect if a Sifi [systemically important financial institution] finds itself in a financially weakened position in a future crisis."

The announcement appears to go against legislation - named Dodd-Frank - that was drawn up to enable the government to seize a struggling Sifi rather than see it bailed out and suggests the institutions may still be viewed as being 'too big to fail'.

By Asim Shah

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