Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke testified before Congress on the administration's handling of executive compensation for companies receiving federal loans and asked for expanded federal regulatory powers. Jeffrey Brown reports.
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The U.S. Treasury called today for regulating non-banking financial companies, such as AIG. Secretary Timothy Geithner faced a House hearing days after congressional anger exploded over the AIG bonuses.
Jeffrey Brown has our lead story report.
At the outset, Secretary Geithner and the chair of the Federal Reserve, Ben Bernanke, moved to try to defuse the tensions of last week over the AIG bonuses. Geithner asked lawmakers to give the Treasury new power to seize crucial financial firms in the future, if necessary.
TIMOTHY GEITHNER, Treasury Secretary:
AIG highlights very broad failures of our financial system. Our regulatory system was not equipped to prevent the build-up of dangerous levels of risk. Compensation practice rewarded short-term profits over long-term financial stability, overwhelming the checks and balances in the system.
The proposed resolution authority would allow the government to provide financial assistance to make loans to an institution, to purchase its obligations or assets, to assume or guarantee its liabilities, and purchase an equity interest.
The U.S. government, as conservator or receiver, would have additional powers to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution's contracts, and prevent certain financial contracts with the institution from being terminated on account of conservatorship or receivership.