The Obama administration is requesting that Congress extends its oversight of the financial system to include the complicated market of derivatives—the kind of complex financial instruments that helped bring the near-collapse of insurance giant American International Group (AIG). In a letter to congressional leaders, the Treasury Department said it wants to create a central electronic-based system that would track the buying and selling of derivatives. It also wants to ensure that financial companies selling derivatives have enough capital in case they default and wants to subject them to strict standards of conduct and new reporting requirements. New rules would deter financial firms from taking unnecessary risks, prevent fraud, and ensure derivatives are marketed appropriately, Treasury Secretary Timothy Geithner said in the letter. The legislative proposal is the administration's first major step in overhauling the country's financial regulatory system.
