On Tuesday, Treasury Secretary and Fed Chair Ben Bernanke asked Congress for expanded regulatory powers over non-bank financial institutions like AIG (read Tuesday's post).  Today Geithner, again in testimony before the House Financial Services Committee, put forth a detailed plan to, as the Washington Post writes, " to overhaul financial regulation by subjecting hedge funds and traders of exotic financial instruments, now among the biggest and most freewheeling players on Wall Street."  

The plan calls for "comprehensive regulatory reform,"  and has four components, according to the Treasury's released outline:

  Addressing Systemic Risk: This crisis – and the cases of firms like Lehman Brothers and AIG – has made clear that certain large, interconnected firms and markets need to be under a more consistent and more conservative regulatory regime. It is not enough to address the potential insolvency of individual institutions – we must also ensure the stability of the system itself.

  Protecting Consumers and Investors: It is crucial that when households make choices to invest their savings we have clear rules of the road that prevent manipulation and abuse. While outright fraud like that perpetrated by Bernie Madoff is already illegal, these cases highlight the need to strengthen enforcement and improve transparency for all investors. Lax regulation also left too many households exposed to deception and abuse when taking out home mortgage loans

  Eliminating Gaps in Our Regulatory Structure: Our regulatory structure must assign clear authority, resources, and accountability for each of its key functions.  We must not let turf wars or concerns about the shape of organizational charts prevent us from establishing a substantive system of regulation that meets the needs of the American people. 

  Fostering International Coordination: To keep pace with increasingly global markets, we must ensure that international rules for financial regulation are consistent with the high standards we will be implementing in the United States.  Additionally, we will launch a new, three-pronged initiative to address prudential supervision, tax havens, and money laundering issues in weakly-regulated jurisdictions. 

For details, read the full outline here.  And Sec. Geithner's statement to Congress here.  And the AP has a video excerpt of the statement: