The nation's top finance officials said Tuesday that the collapse of Lehman Brothers highlights the need for more vigorous regulation of the financial markets.
In testimony before the House Financial Services Committee, Treasury Secretary Tim Geithner, Federal Reserve chairman Ben Bernanke and Securities and Exchange Commission chairwoman Mary Schapiro all stressed that an overhaul of the financial system is necessary to limit the damage of future crises.
"No regulatory regime will be able to prevent major financial firms from reaching the point of insolvency," said Geithner. "But a well-designed regulatory framework must put in place shock absorbers to contain the damage caused by a major firm's default."
Geithner's comments came at the opening of a hearing to explore policy issues related to the bankruptcy of Lehman, which unleashed a crisis of confidence that threw financial markets worldwide into turmoil and sparked the worst downturn since the Great Depression.
The hearing convened as lawmakers debate the Wall Street reform bill passed by the Senate Banking Committee last month. At the same time, financial reform has been in the spotlight since the SEC charged Goldman Sachs with fraud last week, a bold step that unnerved many investors.