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Geithner to Seek Power Over Large U.S. Hedge Funds, Derivatives
Details sketchy, but lets see what happens to "capital formation", code for tax evasion-avoidance in the Bahamas.George will not be happy if they go down this path, so as the guy who likes a party so much that he owns one, expect nothing much to happen. Treasury Secretary Timothy Geithner will ask Congress to bring large hedge funds, private- equity firms and derivatives markets under federal supervision for the first time as part of a revamp of U.S. financial rules. The Treasury chief will present his proposed framework at a House Financial Services Committee hearing in Washington today. Under the new so-called rules of the road, the government would get powers to seize and wind down any financial company big enough to destabilize the banking system. The Obama administration is counting on public anger over the taxpayer-financed rescues of American International Group Inc., Bear Stearns Cos. and other firms to help it win approval for the changes, which could be the most sweeping since the 1930s. Policy makers want to improve the oversight of the financial system now rather than wait until the crisis is over, administration officials said on condition of anonymity. We have a moment now where there is broad-based will to change things that people did not want to change in the past, Geithner said yesterday in a speech in New York. We want to begin the process now of trying to build consensus while people recognize and are feeling so acutely the damage caused by those basic failures in regulation. Geithner plans to work with Congress to hammer out more details and legislation, the officials said. Its unclear how quickly any bills could move through Congress because lawmakers are likely to have their own proposals. Unchecked Risk-Taking Thoughtful and effective measures to prevent a repeat of the type of unchecked risk-taking that has currently put the system at risk are absolutely essential, and must be coordinated globally, said Kirby Daley, senior strategist and head of capital introductions at Newedge Group in Hong Kong. The Treasury secretary will also call for stronger protections against financial fraud for consumers and investors, an elimination of the gaps in oversight among regulatory agencies and stepped-up coordination with international counterparts. Details on those plans will be unveiled in coming weeks, the officials said. The people also said Geithner will offer broad outlines and purposefully wont get down to specifics, such as which agency should police credit default swaps. The swaps are a type of derivative that allows traders to bet on a companys creditworthiness. Wrong-Way Bets AIG sold billions of dollars of the contracts with little money held in reserve in case the bets went wrong, helping seal the insurers downfall, Federal Reserve Chairman Ben S. Bernanke told lawmakers earlier this week. New York-based AIG also exposed the lack of federal powers to take over a non-bank financial firm and allow an orderly process for liquidating it. Geithners framework would set up an independent overseer for systemically vital firms. While the Bush administration had proposed that the Federal Reserve take on that authority, Geithner wont specify which agency should have the job. Bernanke has also called for a systemic-risk regulator, and said the central bank should have some role. Posted by: tipper 2009-03-26 |
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