“Too Big to Fail” is the right size to regulate

By Candyce Torres, University of New Mexico-Talk Radio News Service. “We can’t allow institutions to cherry pick among competing regulators and shift risk to where it faces the lowest standards and weakest constraints, and we need to recognize that risk does not respect national boarder’s. Markets are global and high standards at home need to be complemented by strong international standards enforced more evenly and fairly,” said Secretary of the Treasury Timothy Geithner

Today the U.S. House of Representative’s Committee on Financial Services held a hearing on addressing the need for comprehensive regulatory reform with Geithner. Geithner gave his testimony before Congress based on the complex and vulnerable issues of failed financial institutions, and financial pressures which have contributed to the erosion of confidence in the overall financial system.

Chairman Barney Frank (D-Mass.) expressed that Congress will have to decide whether or not the federal government has sufficient authority existing in dealing with systemic risk. He indicated that the focus of the hearing was to allow Congress to give a governmental agency the power to restrict excessive leverage in order to minimize the excessive debt of failing institutions.

Geithner talked about his objective to craft the framework that will prevent and manage financial crises while concentrating on the substance of reform. He concluded the framework will focus on 4 key areas: systemic risk, consumer and investor protection, eliminating gaps and streamlining regulatory framework and international coordination.