updated 3/25/2009 11:51:26 AM ET 2009-03-25T15:51:26

The administration wants Congress to act quickly on legislation that would give it sweeping new powers to seize financial firms whose collapse could jeopardize the U.S. economy, Treasury Secretary Timothy Geithner said Wednesday.

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In a speech in New York, Geithner said the country should never again be faced with having to choose between a meltdown of the financial system and massive taxpayer bailouts.

The new legislation, which Geithner said will be sent to Congress this week, would give the administration the power to take over financial institutions like troubled insurance giant American International Group Inc.

That would give the administration the same authority to seize nonbank financial companies as federal regulators have with insolvent banks.

“One of the key lessons of the current crisis is that destabilizing dangers can come from financial institutions beyond banks, but our current regulatory system provides few ways to deal with these risks,” Geithner said in remarks to the Council on Foreign Relations.

In response to a question, Geithner said he had not seen a recent article by the head of China’s central bank, Zhou Xiaochuan, in which he called for a new currency to eventually replace the dollar as the world’s major reserve currency. But Geithner praised Zhou and said he looked forward to reading the article. Those comments immediately sent the dollar plunging on world currency markets.

In an effort to contain the damage, Roger Altman, a former deputy Treasury secretary in the Clinton administration, asked Geithner later to clarify his comments, asking if he had meant to imply that the dollar should no longer be the world’s major reserve currency.

Geithner said he did not see any immediate change in the dollar’s position. “I think the dollar remains the world’s dominant reserve currency and I think that it is likely to remain (in that position) for some time,” he said.

The House Financial Services Committee could take up the new financial regulatory legislation as early as next week. The administration is hoping to use the public outrage over $165 million in bonuses provided to AIG, after it had received more than $180 billion in government support, to win congressional approval for the new powers.

Geithner is scheduled to testify before the House committee on Thursday and will outline the administration’s proposals for an overhaul of the entire financial regulatory structure. The legislation will seek to limit risk-taking at firms that could set off severe damage and will raise regulatory requirements to make sure banks have sufficient resources to withstand an economic downturn, he said.

The administration in the coming weeks also will propose new and stronger rules to protect consumers and investors against financial fraud and abuse.

“These will help us deal in the future with threats like the practices in subprime lending that kicked off the current crisis,” Geithner said.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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