NEW YORK-Timothy Geithner, president and CEO of the Federal Reserve Bank of New York, called for substantial reforms to the structure of the regulatory system of the U.S.

"Our current system has evolved into a confusing mix of diffused accountability, regulatory competition, an enormously complex web of rules that create perverse incentives and leave huge opportunities for arbitrage and evasion, and creates the risk of large gaps in our knowledge and authority," Geithner said last Monday at the Economic Club of New York.

He said the Bear Stearns crisis last March presents an "opportunity to bring about fundamental change in the direction of a more streamlined and consolidated system with more clarity around responsibility for the prudential safeguards in the system."

The U.S. needs to build a stronger framework of oversight and authority over centralized payments, clearing and settlement systems and the decentralized, over-the-counter market infrastructure.

"One of the central objectives in reforming our regulatory framework should be to mitigate the fragility of the system and to reduce the need for official intervention in the future," Geithner said. "We can make the system better able to handle failure by making the shock absorbers stronger."

(c) 2008 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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