U.S. Treasury Secretary calls for news rules to cut financial risk

WASHINGTON, April 21 (Xinhua) -- U.S. Treasury Secretary Timothy Geithner said on Tuesday that an overhaul of financial regulations is needed to help limit the damage to the country's financial system.

"We need a system in which regulators can act preemptively to protect, not be left to come in after the fact to clean up the mess. The failure in our financial system were devastating," said Geithner before the House Financial Services Committee on the collapse of Lehman Brothers.

Any strategy that relies on market discipline to compensate for weak regulation and then leaves it to the government to clean up the mess is a strategy for disaster, said the secretary, referring to Lehman Brothers' collapse in 2008.

The collapse of Lehman, the biggest corporate bankruptcy in U.S. history, set off panic in the global financial markets and threw the whole world economy into crisis.

The White House has announced that President Barack Obama will speak in Manhattan on Thursday on the need for reform. The full Senate had been expected to begin debate on the reform bill that day.

Meanwhile, Mary Schapiro, chairwoman of the U.S. Securities and Exchange Commission said that her agency is examining whether any of the 19 largest U.S. banks are using an accounting trick that a bankruptcy examiner has said led to the collapse of Lehman.

"It's not clear any action by the SEC could have saved Lehman Brothers, but we are determined to use the lessons of that experience to be more effective," Schapiro said at the congressional hearing. "More vigorous oversight and a new approach are essential."