Geithner Unveils Massive Regulatory Agenda

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Treasury Secretary Tim Geithner called for a sweeping overhaul of the financial system, Thursday, that would allow regulators to crack down on big hedge funds and derivatives trading.

He told lawmakers that the changes are needed to repair the system he called "too unstable and fragile" to recover from the current financial crisis on its own.

"Over the past 18 months, we have faced the most severe global financial crisis in generations," Geithner said to the House Financial Services Committee. "To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game."

Click play for more analysis on the proposed overhaul with Frank Micciche of the New America Foundation. 

Some of the proposed changes include:

  • Tougher standards on the financial institutions that are considered "too big to fail."
  • Large hedge funds would be required to register with the Securities and Exchange Commission.
  • And the government would be given expanded powers to take over hedge funds and insurance companies on the brink of collapse.

The proposal of expanded regulatory powers comes in response to the problems surrounding the insurance giant American International Group Inc., which caused widespread anger when the company used taxpayer money to distribute $165 million in bonuses.

While many Democrats believed the proposal was a good place to start, there were some who questioned whether giving the federal government too much power would breed corruption, particularly if a single entity was charged with overseeing the financial system.

Such a regime would have to be decentralized, supporters of the overhaul say.

Source: The Associated Press, Fortune

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