by Caitlin Kenney

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke are testifying on Capitol Hill today about the government's involvement in AIG. In prepared remarks, Geithner said the government needs to find a way to "unwind a non-bank financial institution like AIG." How does he plan to do that? Take a look:

The proposed resolution authority would allow the government to provide financial assistance to make loans to an institution, purchase its obligations or assets, assume or guarantee its liabilities, and purchase an equity interest.

The U.S. government as a conservator or receiver would have additional powers to sell or transfer the assets or liabilities of the institution in question, renegotiate or repudiate the institution's contracts (including with its employees), and prevent certain financial contracts with the institution from being terminated on account of the conservatorship or receivership.

 

This proposed legislation would fill a significant void in the current financial services regulatory structure with respect to non-bank financial institutions. Implementation would be modeled on the resolution authority that the FDIC has under current law with respect to banks.

Watch the hearing live.