WASHINGTON–Treasury Secretary Tim Geithner told acongressional committee today he will ask the full Congress onThursday for authority to create a federal receiver for what hecalled "systemically important" nonbank financial firms likeAmerican International Group.

But in his testimony he sidestepped the issue of whether theprimary regulator of troubled, large insurance companies would be afederal or state regulator.

In his statement, he said, "Before taking any emergency action,the Treasury Secretary would need to determine that resolutionauthority is necessary upon the positive recommendations of theFederal Reserve Board and the appropriate federal regulatoryagency."

But asked whether that language indicated the administrationwould be federally regulated going forward, someone familiar withMr. Geithner's comment would only say he was "not referring tosetting up a federal insurance regulator or anything like that,"just noting that "if there is an appropriate federal regulator thenthey would be consulted."

At the same hearing, Federal Reserve Board Chairman Ben Bernankeseconded Mr. Geithner's call for resolution authority over troublednonbank financial institutions, saying dealing with the AIG'stroubled financial situation would have been much easier if such aresolution authority existed.

Their comments were made at a hearing of the full HouseFinancial Services Committee, the second hearing on the tumultcreated by AIG's payment of more than $165 million in bonuses 10days ago to employees of AIG's Financial Products group which putthe company in financial distress.

In his testimony, Mr. Geithner said AIG's problems "highlightthe need for a resolution authority with the power to manage theorderly restructuring of a large, complex, nonbank financialinstitution that poses a threat to the stability of our financialsystem."

He said such a resolution authority would be modeled on the"resolution authority that the FDIC has under current law withrespect to banks."

He is scheduled to unveil the administration's proposal for abroad overhaul of financial sector regulations during testimonyThursday before the same committee.

Along with the new regulating authority, the administrationwants increased oversight and controls of previously unregulatedmarkets such as hedge and private equity funds.

A source familiar with the administration proposal said Mr.Geithner is scheduled to suggest that Congress pass legislationestablishing the Federal Reserve Board as systemic risk regulatorand the FDIC as receiver to administer institutions deemed too bigto fail.

Under the proposal, according to the sources, derivatives andfinancial instruments would be regulated through clearinghouses,and all financial institutions would be required to have increasedcapital levels.

The proposal also calls for hedge funds to be registered withthe Securities and Exchange Committee and be monitored by the SEC,those sources said.

Mr. Bernanke effectively seconded Mr. Geithner's comments.

"I would note that AIG offers two clear lessons for the upcomingdiscussion in the Congress and elsewhere on regulatory reform," Mr.Bernanke said.

First, "AIG highlights the urgent need for new resolutionprocedures for systemically important nonbank financial firms," hesaid.

If a federal agency had had such tools on September 16, "theycould have been used to put AIG into conservatorship orreceivership, unwind it slowly, protect policyholders, and imposehaircuts on creditors and counterparties as appropriate," Mr.Bernanke said.

"That outcome would have been far preferable to the situation wefind ourselves in now," he said.

Second, "the AIG situation highlights the need for strong,effective, consolidated supervision of all systemically importantfinancial firms," Mr. Bernanke said.

He said "AIG built up its concentrated exposure to the subprimemortgage market largely out of the sight of its functionalregulators."

More effective supervision might have "identified and blockedthe extraordinarily reckless risk-taking at AIG-FP," he said."These two changes could measurably reduce the likelihood of futureepisodes of systemic risk like the one we faced at AIG," Mr.Bernanke added.