The Obama administration has unveiled plans to boost
government regulation over the financial system. On Thursday, Treasury Secretary Timothy Geithner outlined proposals including expanding federal regulation for the first time to cover financial derivatives trading, large hedge funds and insurers such as AIG. Regulators would also impose uniform standards to limit the range of functions of major financial firms, including banks. Speaking before the House Financial Services Committee, Geithner said the changes were prompted by the failure of the economic system to regulate excess and greed.

Treasury Secretary Timothy Geithner: “Our system failed in basic fundamental ways. Compensation practices rewarded short-term profits over long-term return. Pervasive failures in consumer protection left many Americans with obligations they did not understand and could not sustain. The huge apparent returns to financial activity attracted fraud on a dramatic scale. Market discipline failed to constrain dangerous levels of risk-taking throughout the system.”

The new rules come on top of previously announced proposals for government authority to seize troubled non-banking financial firms. President Obama is expected to promote the plan in meetings with top Wall Street bankers later today.