Federal Reserve Bank of New York President Timothy Geithner hosted a meeting of 17 major financial institutions who represent 90% of trading in credit derivatives, to discuss the creation of a central clearing house for credit default swaps, and automation of trading and settlement of credit derivatives, and a protocol for managing future defaults.

Mr. Geithner’s remarks came after a speech to the Economic Club of New York in which he called for a more stringent and broadly reaching oversight plan for the government and the Fed. New York Times report adds that among his recommendations were placing investment banks and other major private-sector financial players under a single regulatory umbrella; “strengthening shock absorbers within institutions” by raising the required levels of capital reserves; and streamlining a system of oversight that, he said, had ballooned into “an enormously complex web of rules.”

Regarding inflation, the possibility of the Fed raising rates, and oil prices, Geithner said that the Fed does not as of now see any evidence of a significant acceleration in inflation, and that oil prices were not fueled by speculation, but by a substantial increase in global demand and expectations of future increases.

Regulating hedge funds directly was not practical, he said, but by increasing oversight of the risk which financial firms take by lending to hedge funds could curtail the buildup of excessive leverage. Commenting on the Fed backed Bear Stearns bailout of which he was the 'chief architect', Geithner said that "It was the only feasible option available to avert default" because there was no way to contain the damage that would have resulted from a default.

Writing in the Financial Times, Geithner himself hits on all these points including plans to strengthen the financial system and its ability to withstand default by a big institution.

We are examining what framework of facilities will be appropriate in the future, with what conditions for access and what oversight requirements to mitigate moral hazard risk. Some of these could become a permanent part of our instruments. Some might be best reserved for the type of acute market illiquidity experienced in this crisis. Authority to pay interest on reserves would give the Fed the ability to respond to acute liquidity pressure in markets without undermining its capacity to manage the federal funds rates in line with the federal open market committee’s target. - We can reduce risk in the financial system, Timothy Geithner, Financial Times, June 8 2008.