Geithner wants expanded power to regulate AIG and other non-banking interests

Photo credit: Associated Press

After weeding out the distracting back-and-forth caused by the AIG bonuses, this from the Washington Post is the real news of the day:

Treasury Secretary Timothy F. Geithner asked Congress today for new regulatory authority for non-bank financial institutions such as insurance giant American International Group in order to “eliminate gaps in supervision” and avoid destabilizing threats to the nation’s financial system….

In making his case for regulatory reform, Geithner told the committee, “AIG highlights broad failures of our financial system. Our regulatory system was not equipped to prevent the buildup of dangerous levels of risk.” He said the federal government lacks the legal means at present “to manage the orderly restructuring of a large, complex non-bank financial institution that poses a threat to the stability of our financial system.”

He called for “new resolution authority” to give the federal government the tools it needs to “unwind” an institution as big and complex as AIG. He said he would testify before the committee Thursday to discuss regulatory reform proposals in more detail.

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