Lawmakers from both parties are attacking a White House proposal that would grant the federal government sweeping powers to wind down financial firms – an authority one Democrat derided as “TARP on steroids.”

With Treasury Secretary Timothy Geithner listening in a House hearing room, bailout-weary lawmakers are spending Thursday morning picking apart a proposal by Rep. Barney Frank (D-Mass.) that seeks to grant this “resolution authority” to the government, similar to the authority the Federal Deposit Insurance Corp. has over U.S. banks that become insolvent.

“Let’s not adopt ‘TARP on steroids,’” Rep. Brad Sherman (D-Calif.) said in a release before the hearing started.

Rep. Luis Gutierrez (D-Ill.) slammed the bill’s proposal that when the government has to front money to cover the costs of winding down a dying firm, other big financial firms will pay the bill via a fee assessed after the fact.

Gutierrez argued that the firms should pay into a fund, “Now, today, not after the fact.”

“They should pay for future insurance policy payouts. The fund should be set up just in case their behavior … raises its ugly head again,” he said.

Rep. Spencer Bachus of Alabama, the ranking Republican on the committee, complained that Frank released the draft text Tuesday afternoon, less than 48 hours before the hearing, giving neither members nor witnesses enough time to digest its contents.

Still, he said he’d read enough not to like what’s being proposed. “The administration has chosen to continue its failed policy of taxpayer bailouts,” he said. “Their proposal places taxpayers first in line to bear the losses when the government invokes its resolution authority.”

Rep. Scott Garrett (R-N.J.) raised concern about how much power the Federal Reserve is given under the new bill.

“In the last several months, it was my impression that there was a developing consensus that the Federal Reserve should be given less power, not more,” he said. “In the name of mitigating systemic risk, the Fed is also given unlimited authority to systematically dismantle a private company. This is a lot more sweeping than imposing tougher capital standards.”
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