The Obama administration is proposing the most far-reaching reforms of the financial industry since the Depression - including measures that would for the first time regulate hedge funds and give government the power to seize and dismantle companies deemed a threat to the economy.
The measures, which must be approved by Congress, come in the wake of last fall's near-meltdown of the global banking system and in advance of next week's meeting of the Group of 20 economic powers.
The key measures outlined by Treasury Secretary Timothy F. Geithner on Thursday include:
* Giving the Federal Reserve or another agency the authority to oversee the entire economy for signs of "systemic risk."
* Establishing a government mechanism to seize and dismantle large institutions whose failure threatens the nation's financial stability.
* Passing tougher requirements for the amount of money and assets that financial institutions need to have on hand so they can withstand economic troubles.
* Requiring hedge funds, private equity firms and other private investment funds to register with the Securities and Exchange Commission.
* Setting up a new, comprehensive framework of regulation of the complex financial instruments known as derivatives, including a central clearinghouse for trades in that market.
* Developing stronger requirements for money-market funds so increased withdrawals won't threaten the broader financial system.
"Our system is wrapped today in extraordinary complexity, but beneath all that, financial systems serve an essential and basic function," Geithner told the House Finance Services Committee in a hearing. "Financial institutions and markets transform the earnings and savings of American workers into the loans that finance a home, a new car or a college education." But the system failed last fall, and the government has had to stanch the bleeding with hundreds of billions of taxpayer dollars, including $182.5 billion in commitments to American International Group.