Treasury Secretary Timothy Geithner urged a Senate panel on Wednesday to move swiftly to regulate derivatives contracts, a financial measure used to hedge risk.
Speaking before the Senate Agriculture Committee, which has jurisdiction over financial trading in futures markets, Geithner said that derivatives, which some blame for exacerbating the financial meltdown, had grown largely unregulated.
"These markets grew up largely on the financial frontier, without the basic protections and oversight that existed" in the rest of the final sector," Geithner said. "Firms were able to write massive amounts of debt protection without the capital to back up those commitments, making huge bets that they were unable to cover when the recession hit."
He added, "These problems did not cause the crisis, but they made the crisis much more severe, much harder to manage."
Geithner urged the panel to enact regulation of derivatives by bringing most into centrally operated exchanges and setting stricter standards for more complex contracts that are not suitable for exchange trading as part of the administration's overall efforts to reform the nation's financial regulation system.
"It is very important that we move quickly to fix what was broken in our system," he said. "We have a lot at stake. Much of what is good in the U.S. economy, much of what makes us among the most … productive economies in the world is that we have a financial system that is remarkably good at taking the savings of Americans and matching them with the ideas of someone who wanted to [innovate]."
He added, "We were in many ways among the best in the world at doing that. But we had systematic failure in our system of regulation and we have to work very hard to fix that."
Geithner warned that enacting effective reforms will only become more difficult with the passage of time.
"The longer we wait, the harder it's going to be," he said. "The forces who always fight reform will have better capacity to fight it as the memory of the damage caused will fade."
He added, "We need to do this carefully and it's a complicated challenge, but I think we need to move quickly."
But Sen. Saxby Chambliss, R-Ga., said he was concerned that centralizing the trading of derivatives and standardizing the transactions would be overly restrictive.
"Many end users have told me this would add considerable costs and would likely be passed along to consumers or perhaps prevent their business from using swaps as a risk management tool altogether," Chambliss said.
He added, "Clearly the recent past has taught us the regulator needs more data in order to view and police the entire marketplace, but I am not sure the lesson of the recent market meltdown warrants increased costs to businesses that had little, if anything, to do with creating this situation."
Sen. Blanche Lincoln, D-Ark., also raised some skeptical notes in her questioning of Geithner, especially regarding the administration's proposal to exempt the trading of foreign currencies from some regulation.
Geithner responded that the exemption was an effort to avoid duplicating existing regulation of foreign exchange markets under the administration's goal of not making any situation worse. He added that the administration is still working on precise language to address the situation.
"Maintaining loopholes is definitely not the objective we want here," she said.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.