Treasury Secretary Timothy Geithner on Wednesday said he will soon outline proposals for new, tougher requirements on major financial firms to protect the financial system and new rules to prevent financial fraud and abuse against consumers and investors.
Geithner, speaking to the Council on Foreign Relations in New York, said he would on Thursday unveil a framework for dealing with the kind of systemic risk that bailed-out insurer American International Group
His remarks came as the Obama administration said it would send legislation to Congress this week asking for authority for the government to seize non-bank firms like AIG when they are failing.
Because we have learned from the current crisis that destabilizing dangers can come from financial institutions besides banks, our plan will give the government the tools to limit the risk-taking at firms that could set off cascading damage, he 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.
Geithner said in coming weeks, the administration will propose new stronger rules to protect American consumers and investors against financial fraud and abuse.
These will help us deal with future threats like the practices in subprime lending that kicked off the current crisis, he said.
He also said it was important not to solely focus on U.S. financial regulations, but also to work with other interested nations and strengthened international bodies to set stronger global financial standards.
We will do what is necessary to stabilize the financial system, and with the help of Congress, develop the tools that we need to make our economy more resilient and our system more just, he said.
To get through the crisis, he said the private sector needs to take risks again, and in order to do so, they need to have confidence about financial rules. But the financial and business community also needs to recognize and demonstrate that they need to make changes and sacrifices alongside those the American people are making, he said.
(Reporting by David Lawder, Editing by Chizu Nomiyama)