The Obama administration is trying to sell Congress on the idea of granting the federal government the same authority over non-bank financial companies as it has over banking institutions.
In testifying before the House Financial Services Committee about the federal government's involvement at AIG, Treasury Secretary Timothy Geithner is expected to make the case for greater oversight and power of the private financial services sector.
"The proposed resolution authority would allow the government to provide financial assistance to make loans to an institution, purchase its obligations or assets, assume or guarantee its liabilities, and purchase an equity interest," according to Geithner's prepared remarks.
White House spokesperson Robert Gibbs says the government needs authority "to go in and be able to change contracts, be able to change the business model, unwind what doesn't work," according to the Washington Post, which cites a CNN television broadcast.
The proposed legislation would "fill a significant void in the current financial services regulatory structure with respect to non-bank financial institutions," Geithner says in his remarks. Implementation would be modeled on the authority that the Federal Deposit Insurance Corp. has with respect to banks, he adds.
SOURCES: Washington Post, House Committee Financial Services