March 25, 2009

Geithner pitches new regulatory bill

The U.S. Treasury released an outline of a draft bill addressing failures of financial firms whose downfall would ripple through the economic infrastructure.

The bill would give the government the tools to limit the risk-taking at firms that could set off cascading damage, Treasury Secretary Timothy Geithner told members of the Council on Foreign Relations Wednesday.

The bill would allow the Treasury, with input from the Federal Deposit Insurance Corp. and the Federal Reserve, to make triggering determination that assess a firm's likelihood of failure, its damage to the economy and whether or not government receivership would do any good, The Wall Street Journal reported.

The government would then have the option of dismantling the company in an orderly fashion or supporting the company as is, if that was determined to be the best course of action.

Funding would be handled through a dedicated FDIC program with a mandated budget or through fees levied on applicable firms, the Journal said.

The framework will significantly raise the prudential requirements, once we get through the crisis, that our largest and most interconnected financial firms must meet in order to ensure they do not pose risks to the system, Geithner said.