Geithner Comments On Finance Reform, AIG Disclosure

WASHINGTON--Treasury Secretary Tim Geithner said yesterday that the Obama administration plans to outline a set of "relatively concrete" proposals on financial regulatory reform before March 26 when he is due to testify on the issue before the House Financial Services Committee.

Mr. Geithner made his comments in an appearance before the Senate Budget Committee.

In other remarks, he said Congress and the regulators "need to be very careful" when considering the future of mark-to-market accounting rules.

He warned against doing anything that would erode confidence in people's ability to assess risk.

And, he said the Federal Reserve Board is considering "how to release" a list of counterparties to American International Group's financial transactions, a demand made by numerous members of the Senate Banking Committee during a hearing on AIG last week.

In commenting on the counterparties issue, Secretary Geithner voiced the same concerns that Federal Reserve Board Vice Chairman Don Kohn noted at the AIG hearing, mentioning "delicate legal limitations involved."

The March 26 hearing by the House Financial Services Committee is part of a series of four hearings dealing with "creating a strongly empowered systemic risk regulator" that committee Chairman Rep. Barney Frank, D-Mass., has said his panel will hold before Congress recesses April 3 for two weeks.

The other hearings will be held March 17, March 20 and March 24. The subcommittee's hearing is designed to "fully examine AIG, how it got into its current situation, why it has received so much federal assistance, and how to move forward."

In a statement, Rep. Paul Kanjorski said, "The federal government has provided AIG with access to well over $150 billion in federal aid to protect the global economy."

Unfortunately, he said, "taxpayers do not understand how AIG ended up in such a terrible situation, nor do they understand why the federal government continues to give it money."

"We must assess AIG's progress, as well as how we move forward to ensure that any taxpayer money AIG receives is spent efficiently and effectively," he added.

And in the Senate, Sen. Chris Dodd on March 17 will hold a hearing on insurance regulation in which he will hear from the industry. Insurance regulators will testify at another hearing March 31, according to officials.

As for Secretary Geithner, he told members of the Budget Committee that the administration has begun discussions on financial regulatory reform.

He said that going forward, a revised regulatory scheme must protect against the threat that weakness in one financial institution may cause damage to the entire financial system.

Secretary Geithner said one of the problems with the current financial regulatory system is that financial institutions were allowed to choose their regulators and create products in a way so as to avoid regulation.

He said it is important to create a new regulatory structure that prevents "this kind of regulatory arbitrage."