Treasury to Gain Expanded Powers in U.S. Financial Overhaul

Bloomberg

The U.S. Treasury Department under Secretary Timothy F. Geithner is coming out of the worst economic crisis since the Great Depression with expanded powers to guard against future threats to financial stability.

Geithner, who has managed taxpayer bailouts of companies from Citigroup Inc. to General Motors Co., would lead a council to monitor large financial firms under legislation House and Senate negotiators aim to complete by July 4. Lawmakers confirmed the council’s basic functions yesterday and may approve final language next week. Geithner would also get a research unit that could demand data from banks and regulators and a new national insurance office.

The Treasury-led council’s role includes identifying companies that might be shut down because they pose a risk to the financial system. That authority, even if well-intentioned, could be used for political ends, said Phillip Swagel, a former Treasury economist who’s now a professor at Georgetown University in Washington.

“It’s such an open-ended grant of power,” said Swagel, who worked for Republican Treasury Secretary Henry Paulson. “Do we really want to give that to every future administration?”

Tom Quaadman, vice president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said the legislation will give Treasury “enormous new powers.”

The Treasury would also be required to approve any emergency lending by the Federal Reserve. The Fed used its emergency powers during the crisis to rescue American International Group Inc. and Bear Stearns Cos.

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