Proposed rules mean losses for creditors

/ Source: The Associated Press

Federal regulators are proposing rules that would mean shareholders and other creditors of big failed financial firms seized by the government should expect to suffer losses and won't receive any taxpayer money.

The Federal Deposit Insurance Corp. on Tuesday opened the rules to public comment. The agency was empowered under the financial overhaul law enacted last summer to choose which creditors of a failed firm could receive additional payments beyond those they would get in a normal bankruptcy proceeding.

FDIC officials said few creditors would get extra payments. They could include, for example, vendors enabling the government to continue essential company operations such as paying employees.

"It's very important that the market understand that it's not a bailout," an agency official said in a conference call with reporters.