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 Speaking at the SIFMA annual meeting on Tuesday, Treasury Secretary Timothy Geithner shared his thoughts on the need to give regulators the tools to manage a wind-down of a large, systemically important financial institution so there is never a repeat of the week that Lehman Brothers Holdings Inc. failed. He said: "Reforming the system requires giving the government better tools to allow institutions to fail. You want to build a system where neither investors nor institutions believe that government will come in and insulate them from their bad decisions. In order to do that, you need a system strong enough to survive the shock and give the government the tools to manage the dissolution of a firm without it delivering a major shock to the system if a firm manages itself to the edge of the abyss. "You have to design a system where the failure of an institution doesn't completely undermine other viable institutions" With that in mind, Geithner also discussed the reasons why he thought the stress tests were so important for restoring confidence in the banking sector. "The stress tests forced banks to disclose information on what was on their balance sheets. By lifting the hood on the banks, we removed much of the uncertainty and made it possible for a huge amount of capital to come into the banks ... from the private sector, not from the government." - George White See more coverage from this conference: Tim Geithner on the economy Jamie Dimon on the financial crisis Jamie Dimon on rescuing other banks Johnstone and Kruszewski on client trust Finance execs on reg reform at SIFMA Conference Board's Spector on compensation Mary Shapiro on the crisis, regulatory overhaul
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