U.S. Treasury Secretary Timothy Geithner on Tuesday joined the Federal Reserve in calling for authority to wind down failing non-bank financial firms that threaten the financial system.
Geithner, in prepared testimony before the U.S. House of Representatives Financial Services Committee, said Congress should approve legislation giving the government the ability to step in to put a major institution under conservatorship.
As we have seen with AIG, distress at large, interconnected, non-depository financial institutions can pose systemic risks just as distress at banks can, Geithner said. The administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context.
(Reporting by David Lawder and Glenn Somerville; Editing by Theodore d'Afflisio)