Treasury Secretary Timothy Geithner proposed a sweeping revamp of government regulatory powers over the nation’s financial system highlighted by establishing a single agency “with responsibility for systemic stability over the major institutions and critical payment and settlement systems and activities.”
In his testimony before the House Financial Services Committee, Geithner told lawmakers what was needed was “comprehensive reform. Not modest repairs at the margin, but new rules of the game. We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.”

The Treasury Secretary did not provide details but said they would be forthcoming over the next several weeks.

The plan would imbue a single agency with the power to police firms not currently subject to federal oversight and impose government supervision over entities such as hedge funds and traders of complex financial instruments like derivatives and credit default swaps.

That “super-regulator”  would not supplant existing regulators such as the SEC or the Office of Thrift Supervision. The Treasury Secretary did not identify which current agency would take the role of overseer, but it has been reported that the administration is leaning toward the Federal Reserve.

Geithner’s plan, which requires congressional approval, would give the government expanded powers over banks and other financial institutions that have been labeled “too big too fail.”

The plan also entails allowing regulators to impose executive compensation standards on financial firms, a flashpoint in the aftermath of the outrage at the $165 million in bonuses paid by giant insurer AIG.

Geithner’s plan also entails monitoring the financial markets for what he termed “emerging dangers.”
On Thursday, the Obama administration sent the first piece of its proposed regulatory legislation to Congress, which would, if passed, grant the government the power to seize any large, troubled financial firm. Currently it only has the power to seize banks.

Current SEC Chair Mary Schapiro in testimony before the Senate Banking Committee said that her agency’s mission should not change despite the calls for a super-regulator.

In testimony before the Senate Banking Committee, Shapiro said that investor protection and capital formation “cannot be compromised as the product of any reform effort.”

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