Geithner to propose major regulatory reform

LOS ANGELES (MarketWatch) — Treasury Secretary Timothy Geithner is expected to propose sweeping new financial regulations during Congressional testimony Thursday, including tougher government oversight of financial risk taking, reports said.
According to reports in The Wall Street Journal and Washington Post, Geithner’s proposals — much of which will likely require new legislation — would extend federal regulation of derivatives trade and place tighter controls over hedge funds.
The new rules will likely require financial institutions to hold more capital as a buffer against losses and will bolster risk-management standards, the Journal report said.
The proposals would mean significant expansions of power for the Treasury, Federal Reserve and other regulators, it said.
Geithner will also seek to extend federal regulation for the first time to all trading in financial derivatives, the Post reported.
The Journal report said it wasn’t clear which types of firms would be included under the proposed rules, but cited administration officials as saying they could include banks’ parent companies, insurance conglomerates and certain hedge funds, and would depend on a company’s size, leverage, reliance on short-term funding and role in the financial system.
Geithner is also expected to ask Congress to require all of these firms over a certain size to register with the Securities and Exchange Commission and disclose certain information so government officials can determine whether their size or complexity puts the broader economy at risk, the Journal report said. Read full WSJ.com story on Geithner proposals.
In coming months, the administration plans to detail its strategy in three other areas: protecting consumers, eliminating flaws in existing regulations and enhancing international coordination, according to the Post.

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