Word: geithner
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...Treasury Secretary Geithner has told Congress that he would like to regulate Wall St. right down to the foundations of all of its buildings. That includes hedge funds, private equity firms, and traders of exotic financial instruments which may include credit default swaps and financial derivatives. Investment advisors like Mr. Madoff would also be watched more carefully by the government. In the Secretary's own words, "What we need is better, smarter, tougher regulation, because we've seen the costs of these weaknesses and gaps are catastrophic to the system as a whole." (See pictures of the global financial crisis...
...Geithner argued that the power is needed to ensure that a floundering firm doesn't start a domino collapse among other companies doing business with it, thereby posing what regulators call "systemic risk" to the whole economy. "This is a prudent, carefully designed proposal to protect our financial system," Geithner said, arguing that if Treasury had had that power a year ago, it could have handled the collapses of Bear Stearns, Lehman and AIG very differently. Other Democrats said the power isn't so radical at all; the FDIC already takes over traditional banks on the verge of collapse - when...
Though politicians on Capitol Hill have made less of it thus far, the other change that Geithner is seeking is even farther-reaching and arguably more controversial on Wall Street. As banks must do now, big hedge funds, private equity firms, insurance companies and others who play in the financial markets would have to open their books (on a confidential basis) regularly to government overseers. Hand in hand with that requirement would be much tougher limits on how much risk any financial firm could take, so that the days of making huge bets on the markets with relatively little...
...clear," Geithner told the committee. "The days when a major insurance company could bet the house on credit-default swaps with no one watching and no credible backing to protect the company or taxpayers must...
...complaining, Geithner is likely to get much of the authority he wants. The power he is asking for could be invoked only under explicitly prescribed circumstances, similar to those imposed by Republicans on the FDIC in the early '90s, when it takes dramatic action in case of major banking crises. Though industry officials may gripe, Geithner's fixes are little different from the rules that traditional banks already abide by (and make plenty of profits under). And even the GOP might not have as many philosphical objections as one would expect. On the same day that Geithner rolled...