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Bernanke could be asked by panel members about the Fed's handling of the Lehman Brothers episode and Fuld's accusations. Thomas Baxter, general counsel of the New York Fed, insisted at Wednesday's hearing that the Fed lacked the legal authority to provide a government guarantee of Lehman's obligations to its trading partners or other aid the firm sought. Hundreds of billions worth of collateral would have been needed to secure a guarantee of that magnitude, and Lehman didn't have it, Baxter said. Bair, the FDIC chief, has been one of the most vocal critics of the "too big to fail" approach that brought the government rushing in to bail out big banks in the crisis. "Never again should taxpayers be asked to bail out a failing financial firm," Bair told community bankers in a speech in March. "It's time that the big players understand that they sink or swim on their own." Bair took on a high profile and gained popularity outside Washington early in the crisis, as she pressed for more government intervention to help struggling homeowners. That opened a rift with then-President George W. Bush's treasury secretary, Henry Paulson.
[Associated
Press;
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