Geithner presses case for reform

WASHINGTON, Oct. 29 (UPI) -- U.S. Treasury Secretary Timothy Geithner told Washington lawmakers Thursday the next financial crisis must be handled without taxpayer assistance.

In the current crisis, abating as the economy improves, "the government was forced to step in and stand behind all of these firms. That cannot happen again," Geithner told members of the House Financial Services Committee.

New legislation proposed by the Treasury with assistance from Committee Chairman Barney Frank, D-Mass., seeks to create a regulatory system that could handle the collapse of even the largest financial firms without dipping into taxpayers' pockets, Geithner said.

The bill "would not permit the government to put money into a failing firm unless that firm is in government receivership and on the path to being unwound, sold or liquidated," he said.

The government, instead, would turn to large firms to finance any government intervention that was required. To do so, and to reduce the "moral hazard" large firms would pony up funds after one of the firms had failed, Geithner said.

"A standing fund would create expectations that the government would step in to protect shareholders and creditors from losses," he said.