The Obama administration took another step in the direction of financial management regulatory control yesterday, asking Congress to extend its oversight of financial markets to include derivatives. Derivatives and other instruments, such as mortgage-backed securities, contributed to American International Group’s need for federal funding last September.

Treasury Secretary Timothy Geithner said in a two-page letter sent to Congressional leaders that he wants to create a central, electronic-based system that would track the buying and selling of derivatives. In the letter, he told Congress that the administration wants to make certain that financial firms selling the instruments have enough capital on hand in case they default. The letter also indicated the desire to establish stringent standards of conduct and another set of reporting requirements.

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