Geithner to map US financial regulation reform

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WASHINGTON, Mar 24 (Reuters): US Treasury Secretary Timothy Geithner will face tough questions from lawmakers on Tuesday as he spells out the basics of the Obama administration's plans to reshape financial regulation at a high-profile congressional hearing.
Geithner faces back-to-back sessions Tuesday and Thursday before the House of Representatives Financial Services Committee in which he will have to explain his handling of the AIG bonuses issue, as well as his plan for buying up toxic bank assets through a massive public-private venture.
Both problems have clouded Geithner's brief tenure as President Barack Obama's point man on saving the financial system and instituting reforms to prevent future crises.
But Geithner's hand strengthened on Monday when the stock market rallied strongly on the release of long-awaited details of the government's toxic assets strategy.
So he may find the committee more willing to listen as well as complain as he outlines proposals for the difficult future.
As Washington begins to shift from saving the financial system from immediate disaster to fixing it for the long haul, Geithner will propose boosting the government's role in the economy in two key ways, both meant to prevent another crisis.
Obama is expected to carry these two proposals, along with other basic principles, to an April 2 summit of the Group of 20 leading nations in London, where financial regulation reform will be a major topic.
At the top of the administration's regulatory reform list is establishing a clear government procedure for "unwinding" large, failing firms that are not banks.
The troubled bailout of insurer American International Group Inc underscored the lack of a process for managing failed nonbank firms, short of allowing them to declare bankruptcy. AIG has received three bailouts at a cost of up to $180 billion.
The issue has far-reaching implications for what it means to be "too big to fail" in American business. Geithner is expected to discuss "unwind authority" in broad terms on Tuesday at the committee hearing focused on AIG.
With input from the administration, the committee is drafting legislation to establish unwind, or resolution, authority and could vote on it next week, congressional aides said Monday.