WASHINGTON - Treasury Secretary Timothy Geithner will announce a plan on Wednesday to strengthen federal regulations governing over-the-counter derivatives, a class of financial instruments that includes the risky contracts that helped bring down AIG.
Sen. Christopher Dodd, a Connecticut Democrat who chairs the Senate Banking Committee, said Wednesday he has been told that the administration will "really tighten down" on them. He said had not been told how and did not have further details.
Geithner was scheduled to brief reporters at 4 p.m. EDT.
According to the New York Times, the administration will ask Congress to approve legislation that would impose a new government oversight structure for the instruments, which Warren Buffett once called “weapons of mass destruction.”
In a two-page letter to Congressional leaders, Geithner asked for the swift approval of a measure that would require many kinds of derivative instruments, including credit default swaps, to be traded on exchanges and subject to tighter regulation. Derivatives can take many forms, but in total there are trillions of dollars’ worth exchanging hands every day around the globe.
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