Treasury Secretary Tim Geithner will unveil a four part plan to reform financial regulation when he testifies before the House Financial Services Committee Thursday.
According to senior administration officials, Geithner's plan addresses systemic risk, regulatory gaps and holes within the system, consumer and investor protection and international cooperation among regulators.
The focus of Thursday's testimony will be on systemic risk, with details about the three other parts of the plan to be unveiled over the next two to three weeks.
To address the problem of systemic risk, Geithner will call for a single systemic risk regulator. The regulator would be able to look at all aspects of any financial firm to determine what they do and the risks they take, and what those risks pose to the broader economy.
Officials say the plan does not endorse any specific body, like the Federal Reserve, to serve as the systemic risk regulator, only that the office be independent. In his testimony Geithner will also suggest all hedge funds be required to register with the SEC, and that credit default swaps (CDS) and over the counter (OTC) derivatives be regulated.
Officials say Geithner will not make a specific recommendation about what body should regulate CDS's and OTC derivatives only that they be subject to a strong supervisory regime. Officials say Geithner will not be making any recommendations on how executive compensation should be regulated, though he has, in the past said changes need to be made.
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Officials say the four part plan is aimed at restoring trust in the financial system with a new set of "rules of the road." It is also an indication of what the U.S. will bring to the table at the G-20 in April.
Officials say after taking a leadership role in calling for other countries to increase stimulus to battle a global recession, the Obama administration plans to take a leadership role in addressing the problem of systemic risk.