The Obama administration is planning a massive overhaul of its regulatory powers, in a plan to lay a foundation that will allow it to mitigate against the risk of future economic meltdowns. The Obama administration will seek to regulate the market for credit default swaps and other types of derivatives and require hedge funds to register with the Securities and Exchange Commission (SEC). Treasury Secretary Timothy Geithner will outline the proposals in testimony Thursday before the House Financial Services Committee. According to the Associated Press, the plan “includes a measure that Geithner and Federal Reserve Chairman Ben Bernanke discussed before the committee on Tuesday to give the administration expanded powers to take over major nonbank financial institutions, such as insurance companies and hedge funds that were teetering on the brink of collapse.” That power was aimed at preventing a repeat of the problems surrounding insurance giant American International Group Inc., which sparked a furor last week when it was revealed the company had distributed $165 million in bonuses to employees of its financial products group. The unit specialized in trading credit default swaps, the instruments that drove the company to near-collapse last fall. The administration sent Congress a 61-page bill dealing with the expanded powers to seize control of nonbank institutions late Wednesday. The House Financial Services Committee, chaired by Rep. Barney Frank, D-Mass., has indicated it could move on the measure as early as next week.
