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American International Group

Fed moves to bar bailouts of failing firms

Federal Reserve officials have moved to prevent the central bank from bailing out failing companies, a power it exercised during the 2008 financial crisis.

The Fed governors voted 5-0 Monday at a public meeting to downsize the Fed's emergency lending powers.

Only broad lending programs designed to revive frozen markets — not loans to individual firms — will be allowed. Financial companies that are in solid shape could benefit from those programs. The Fed spent about $2 trillion on such a program to ease a credit crunch during the financial meltdown, aiming to spark lending to consumers and small businesses.

The 2010 law enacted by Congress overhauling...