28 Mar 2009

New plan to strengthen US financial system

9:04 am on 28 March 2009

United States Treasury Secretary Timothy Geithner has announced plans for a new single regulator to oversee the financial system in a bid to avoid a repeat of the current crisis.

It comes as new figures show the American economy shrank at its fastest pace in 27 years in the final quarter of 2008, with corporate profits plunging a record $US120 billion.

The new entity would regulate financial institutions, services and markets, and for the first time include all hedge funds and derivatives.

Mr Geithner told a US House Committee a simpler system is needed and the government has not had "adequate tools" to handle the financial crisis.

Newly released government data blames a slump in consumer spending and exports for much of the 10.7% after-tax decline in profits.

The number of American workers collecting unemployment benefits rose to a record 5.5 million people earlier this month, while new jobless claims climbed to 650,000 this week.

Gross domestic product, which measures the total output of goods and services within US borders, fell at an annual rate of 6.3% in the October to December quarter, the steepest decline since the first quarter of 1982.