U.S. Treasury Secretary Timothy Geithner says the 2008 collapse of financial giant Lehman Brothers clearly proves the need for tighter government regulations.
Speaking to a congressional committee Tuesday, Geithner says the Lehman bankruptcy, which he described as the largest in U.S. history, pushed the economy to the "brink of collapse."
Federal Reserve Chairman Ben Bernanke told the same committee the central bank lacked the legal means to regulate the firm or take it over in order to prevent damage to the rest of the economy. He said that at the time of the crisis, the Federal Reserve was not aware of Lehman's accounting tricks used to mask the company's true debt.
The head of the Securities and Exchange Commission, Mary Shapiro, said the Lehman case shows the need for regulators to have the power to take over an failing firm, break it up and sell them it over time. U.S. officials already do this when banks collapse, and redistribute assets and debts in an orderly way, minimizing the damage to the rest of the financial system.
Shapiro also called for large financial firms to keep more money in reserve in case investments go sour.
Some information for this report was provided by AP, AFP and Reuters.