Treasury Wants to Impose More Stringent Requirements on Large Institutions

The U.S. Treasury Department wants to impose more stringent rules and regulations on large, systemically critical institutions in the United States, as well as the authority to unwind such firms in the event of a possible collapse.

In testimony to the House Financial Services Committee on Thursday, U.S. Treasury Secretary Tim Geithner unveiled an ambitious reform plan to the U.S. financial system that includes more stringent capital requirements for large systemic institutions, whose collapse could have far reaching implications for the broad financial market.

Geithner promised that the Obama administration will do what is necessary to stabilize financial markets and help restore economic growth.

The Treasury Secretary also suggested that his Department and the FDIC be responsible for determining whether a large financial institution or a non-bank institution should be taken into receivership by the U.S. government, and stressed the importance of having one regulator to oversee these institutions.

Geithner told lawmakers that firms should not be allowed to "cherry pick" their regulator.

The U.S. government is also looking to launch reforms to the U.S. tax code to allow for recovering lost income from individuals investing in tax havens, a key issue as the Obama administration seeks to finance the largest budget deficit in U.S. history.

Geithner also backed a proposal from the U.S. Securities and Exchange Commission, calling for the regulation of credit default swaps and municipal securities, and forcing hedge funds to register with the SEC.

In testimony to the Senate Banking Committee, SEC commissioner Mary Schapiro also asked for congressional permission to reward whistle-blowers, in order to help root out illegal activity.

Schapiro also promised to look into reinstating a variation of the uptick rule next month.

By Erik Kevin Franco and edited by Sarah Sussman
©CEP News Ltd. 2009