One more Capitol Hill group therapy session

Reuters has filed this report with highlights of today's appearance by Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, and New York Federal Reserve Bank President William Dudley before the House Financial Services Committee to talk about problem child AIG.
Yes, a picture is worth a thousand words.

Some of those words are provided below.

GEITHNER ON NEED FOR NEW REGULATORY AUTHORITY:

The lack of an appropriate regulatory regime and resolution authority for large non-bank financial institutions contributed to this crisis and will continue to constrain our capacity to address future crises. ... The 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.

And from a related story:

"This division was an unregulated entity operating in unregulated markets," Geithner said, which forced Treasury, the Fed Board in Washington and the New York Fed to step in with loans and support because its collapse could endanger the whole financial system.

"A disorderly failure of AIG risked deepening and prolonging the current recession," Geithner said, adding the problem was that there currently was no legal mechanism for winding down a non-bank financial institution like AIG.

And a few words from the Fed chief:

BERNANKE ON NEED FOR NEW REGULATORY AUTHORITY:

First, AIG highlights the urgent need for new resolution procedures for systemically important non-bank financial firms. If a federal agency had had such tools on September 16, they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate.

In the new regulatory regime now being formulated, the recurrence of all the bad things that have led to our current condition will undoubtedly be prevented, forcing Wall Street to figure out an entirely new way of bringing the financial system to its knees again sometime in the next decade.