US seeks dramatic expansion of financial regulatory powers

Business Materials 26 March 2009 19:44 (UTC +04:00)

President Barack Obama's administration, in a massive overhaul of the US financial regulatory system, is seeking the power to keep watch on all types of financial firms and to seize failing companies integral to the health of the system, dpa reported.

US Treasury Secretary Timothy Geithner unveiled the plans in congressional testimony on Thursday, arguing that the current financial turmoil has proven the system is "too unstable and fragile" to be allowed to manage itself.

"To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game," he said in prepared testimony before the Financial Services Committee of the House of Representatives.

The Obama administration proposed tasking a single government regulator with broad oversight over the entire financial industry, including over non-banking firms such as hedge funds and insurance firms that have effectively remained outside the reach of government.

Some major US banks have failed since September and others have been given hundreds of billions of dollars in emergency government loans to preserve the stability of the US financial system.

The financial collapse has been blamed on unnecessary risks taken by Wall Street firms, but also on government regulators who failed to warn of an impending crisis.

Geithner did not say which regulator would take on the task of monitoring the financial industry. Many have suggested the Federal Reserve, the US central bank, is best suited for the job.