United States wants new rules for the markets
The U.S. would be the worst global financial crisis since generations, Geithner said: “That tackle, requires comprehensive reform. None modest repairs on the edge, but new rules.”
This is the starting shot for a – probably a long and tough – the debate about how the confidence in the U.S. financial system can be restored. Gaps in oversight will be closed, incurring excessive risks are avoided. The proposals come a week before the summit of the world’s 20 most industrialized and emerging countries (G20) in London, where on the future regulation of financial markets is discussed.
Geithner outlined the plans before the Financial Services Committee of the House of Representatives. The relevant laws should be in cooperation with the Congress will be drawn to the many questions his own reform plans. “We now have the opportunity,” said Geith, “and we must act.”
The reforms are expected to power the government, the Federal Reserve and other regulators to expand significantly. They run parallel to efforts to stabilize the banking sector and the economy.
For risks to the financial system as a whole better observe and be able to want the government system-related businesses strictly supervise. This could be a new independent authority will be created. It is also debated, the Fed Fed this role.
Geithner said no to the question of who takes over this task, but made it clear what powers the regulator should have. Thus, the Authority issues are forcing companies to their capital base or to enhance the borrowing limit. Should the institutions in serious trouble, they under state administration can be made.
Among the regulated entities could, for example, bank holding companies, insurance conglomerates and certain hedge funds belong. Whether an enterprise system is relevant, inter alia, be based on the size, degree of indebtedness and dependence on short-term financing on the capital to be determined.
Hedge funds and private equity firms over a certain size will be in the SEC to register and you must provide certain information, such as their business partners. The companies must also focus on inspections by SEC staff members lie in wait. If problems are encountered, the SEC may be the company to the new regulator transfer. “We do not propose that they be regulated like banks,” said Geithner, however, hedge funds. This position could be at the G20 meeting conflicts with countries that are such a widespread call for regulation.
Light in the trading of credit derivatives
Even the market for credit derivatives, the buttons government. The focus is on credit derivatives (credit default swaps, CDS) is particularly in focus. The papers with which investors against payment defaults of securities to hedge, the future only on so-called clearing house transactions. Until now runs most of the trade off, the market is so opaque. If a major market participants fails, as the U.S. investment bank Lehman Brothers last autumn, a number of trading partners being in danger. One or more clearing houses is to absorb counterparty risk by acting as a buyer and seller for each player gets. In the EU until the end of July is such a processing facility to be established.
Geithner called for regulators to consider new rules to consider the banks require, in boom times extra reserves to defend Wirtschaftsflauten upon them. “We must balance our requirements check and see if we – in line with the interests of investors – from companies require that they advance reserve for credit losses are,” said Geithner.
Treasury and FDIC will take care of non-banks
Work is already on a new legal basis by which the government will collapse before the standing Finance Institute, the banks are not under state administration can provide. For these institutions, in future, the Ministry of Finance and the FDIC deposit insurance jointly responsible. They are the companies abgewickeln or in part can sell. Was triggered by the controversy surrounding the insurer AIG, which the state with up to $ 180 billion is based – on the government but still little-through rights. So the group poured millions of dollars in bonuses, leading to a public outcry resulted.