The administration of US President Barack Obama is proposing an extensive overhaul of financial regulations in an effort to prevent a repeat of the banking crisis last fall that toppled once-mighty institutions and wiped out trillions of dollars in investor wealth.
Officials said the administration would seek to regulate the market for credit default swaps and other types of derivatives and require hedge funds to register with the Securities and Exchange Commission.
US Treasury Secretary Timothy Geithner was scheduled to outline the proposals in testimony yesterday before the House Financial Services Committee.
Administration officials provided details of the administration’s plan before the testimony only on condition of anonymity.
The program the administration was presenting to Congress will also include a recommendation for creation of a systemic risk regulator, possibly at the US Federal Reserve, to monitor risks to the entire system.
The plan also includes a measure that Geithner and Federal Reserve Chairman Ben Bernanke discussed before the committee on Tuesday to give the administration expanded powers to take over major non-bank financial institutions such as insurance companies and hedge funds that were teetering on the brink of collapse.
That power was aimed at preventing a repeat of the problems surrounding insurance giant American International Group Inc, which sparked a furor last week when it was revealed the company had distributed US$165 million in bonuses to employees of its financial products group.
The unit specialized in trading credit default swaps, the instruments that drove the company to near-collapse last fall.
The administration, pushing Congress to act quickly on its reform agenda, sent Congress a 61-page bill dealing with the expanded powers to seize control of non-bank institutions late on Wednesday and the House Financial Services Committee, chaired by Representative Barney Frank, has indicated it could move on the measure as early as next week.
However, it was unclear how fast the rest of the financial reform agenda might move through Congress.
Geithner was providing only a broad outline of the other proposals, with many thorny details still to be worked out.
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