Rep. Manzullo to Geithner: Your Plan Is 'Radical'

UPDATED at 1:21 P.M.:

In testimony before the House Financial Services committee that just adjourned, Treasury Secretary Tim Geithner just had to defend his institutional takeover plan against charges of radicalism.

"Do you realize how radical your proposal is?" Rep. Donald Manzullo (R-Ill.) asked.

"It's not radical. . ." Geither began, before Manzullo interrupted him.

"You're talking about seizing private businesses and you don't consider that radical?" Manzullo replied, his voice rising.

Manzullo is trying to get Geithner to give details of the plan -- that's where Geithner got stung before -- but Geithner doesn't have them yet.

If the plan were not radical, Manzullo said to Geithner, "you would have answers to some of my questions, such as, what size business would be subject to this?"

Geithner: Banning 'Naked' Credit Default Swaps Not NecessaryGeithner said banning so-called naked credit default swaps "isn't necessary and wouldn't help."

Noon:

A credit default swap is insurance one party sells to another against default on a debt. In a "naked" swap, one party carries no actual risk in the transaction; instead, it's a bet on the transaction's outcome.

Naked swaps have been criticized as being speculative at best and actually creating risk.

Rep. Joe Donnelly (D-Ind.) asked Geithner if he would consider banning the swaps.

"To me, I'm from the Midwest, these just look like simple bets," Donnelly said, which American taxpayers have been forced to pay off.

Geithner allowed that there is strong debate on the issue and that "my own sense is that banning naked credit default swaps isn't necessary and wouldn't help." He said it is "terribly hard" to differentiate between a legitimate hedge and a pure speculative bet.

The House Financial Services committee, where Geithner is testifying, is now in recess so members can vote on legislation.

Geithner: New Regulatory Power Over Financials Should Rest With FDICGeithner said the governments sweeping new powers to seize non-bank financial institutions, if passed by Congress, would be based on the FDIC's model.

10:54 A.M.:

Asked by Rep. David Scott (D-Ga.) where such sweeping powers would rest, Geithner said "we would rely on the FDIC to run the regime."

Congress appears open to Geithner's plan, if Rep. Paul Kanjorski's (D-Penn.) statement earlier represents the general sentiment of the body: "We need to provide the administration with a bigger hammer."

Geithner: 'New Rules Of the Game' NeededGeithner is rolling out his proposed sweeping changes to the the regulatory system governing the financial industry, which were first reported here by The Post's Binya Appelbaum and David Cho.

10:12: A.M.:

Geither is proposing "new rules of the game."

You can read his entire testimony here.

Geithner said it his intent to lay out the "substance of reform" today but not "the complex and sensitive questions of who should be responsible for what."

This could be troublesome for Wall Street, which freaked out the last time Geithner failed to provide details for a big plan, when he rolled out the "substance" of his toxic asset plan but not its details.

-- Frank Ahrens
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