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US plans to rein in Wall Street US plans to rein in Wall Street
(10 minutes later)
US Treasury Secretary Timothy Geithner is outlining far-reaching plans to strengthen government authority over the US financial system.US Treasury Secretary Timothy Geithner is outlining far-reaching plans to strengthen government authority over the US financial system.
The measures are designed to prevent the kind of systemic risk-taking among banks that has contributed to the current financial crisis.The measures are designed to prevent the kind of systemic risk-taking among banks that has contributed to the current financial crisis.
In his initial remarks, Mr Geithner told a US House Committee that a simpler system was needed.In his initial remarks, Mr Geithner told a US House Committee that a simpler system was needed.
He said government had not had "adequate tools" to handle the crisis.He said government had not had "adequate tools" to handle the crisis.
'New rules''New rules'
"These failures have caused a great loss of confidence in the basic fabric of our financial system," Mr Geithner said in his prepared testimony."These failures have caused a great loss of confidence in the basic fabric of our financial system," Mr Geithner said in his prepared testimony.
He said that "new rules of the game" were needed to achieve comprehensive reform, rules that "must be simpler and more effectively enforced".He said that "new rules of the game" were needed to achieve comprehensive reform, rules that "must be simpler and more effectively enforced".
The treasury secretary said the financial system "needs to be subject to strong oversight by the government". He called for more openness and transparency.The treasury secretary said the financial system "needs to be subject to strong oversight by the government". He called for more openness and transparency.
He also talked of "unwise" risk-taking and a failure of "market discipline".He also talked of "unwise" risk-taking and a failure of "market discipline".
"Regulated institutions held too little capital relative to the risks to which they were exposed," he said."Regulated institutions held too little capital relative to the risks to which they were exposed," he said.
New frameworkNew framework
Mr Geithner said: "We need better, smarter, tougher regulation."Mr Geithner said: "We need better, smarter, tougher regulation."
He outlined five elements of a plan to achieve this:He outlined five elements of a plan to achieve this:
  • Establishing a single entity responsible for stability among major institutions
  • >Enforcing more conservative capital requirements for financial institutions
  • >Forcing investment companies of a certain size to register with the Securities and Exchange Commission (SEC), the US financial regulator
  • >Establishing a framework for derivative markets
  • >Strengthening requirements for money market funds.
  • Establishing a single entity responsible for stability among major institutions
  • >Enforcing more conservative capital requirements for financial institutions
  • >Forcing investment companies of a certain size to register with the Securities and Exchange Commission (SEC), the US financial regulator
  • >Establishing a framework for derivative markets
  • >Strengthening requirements for money market funds.
Mr Geithner said that time was of the essence in implementing these five elements.
"We have touched a moment of opportunity, we need to act," he said.
He also stressed the importance of the international effort to reform the global financial system.
"We will work with the Europeans, we cannot move alone," he said.