On Wednesday, September 23, 2009, Treasury Secretary Geithner spoke before the House Financial Services Committee (the “Committee”), which recently opened hearings on the administration’s sweeping overhaul of the financial system. Geithner’s testimony speaks of a renewed commitment on the part of the Obama administration and key members of Congress to enact legislation before year-end. 

During his testimony, Geithner specifically referred to proposed investment adviser and private fund regulation, stating that the administration’s proposal, “will strengthen standards for investment advisors and brokers while expanding Securities and Exchange Commission (SEC) authority over disclosure and enforcement . . . [and] . . . will bring unregulated firms and markets into the system by requiring registration of hedge funds, and setting clear rules for all derivatives markets.”

Acknowledging that the country has “moved back from the financial brink and toward economic recovery,” Geithner nevertheless attempted to instill in lawmakers a renewed sense of urgency on the need for immediate and comprehensive financial reform.  “The flaws in our financial system and regulatory framework that allowed this crisis to occur, and in many ways helped cause it, are still in place,” Geithner stated.  “We simply cannot walk away from the worst financial crisis since the Great Depression and not do everything in our power to reform the system.”

Rep. Barney Frank, chairman of the House panel, and Sen. Chris Dodd, chairman of the Senate Banking committee, have committed to President Obama’s pledge to enact legislation by the end of this year.  But even as he expressed appreciation to the chairmen for their commitment, Geithner urged lawmakers to move quickly.  “Time is the enemy of reform.  As some normalcy returns to our financial system and our economy, we cannot let it be cause for complacency.”

Geithner’s appearance before the Committee comes just as lawmakers begin in earnest to markup the more than 600 pages of legislation that the Obama administration has provided it, which legislation includes the private fund manager registration bill (The Private Fund Investment Advisers Registration Act of 2009) that was proposed by the Treasury Department in July (the “Treasury’s Proposal”).  If passed, the Treasury’s Proposal would implement many of the private fund regulatory initiatives that were initially set forth in the Treasury Department White Paper.