Shortly after President Barack Obama proposed the biggest financial regulatory overhaul since the Great Depression in a speech at the White House today, Treasury Secretary Timothy Geithner warned that the government still lacks the "capacity to deal" with a major collapse in the financial sector.
"Even today, we still don't have the capacity to deal with a future AIG, a future Lehman," Geithner told "Nightline" anchor Terry Moran in an exclusive interview in Washington, D.C. "That's why we're proposing these better tools for crisis management. So it was a tragic thing for the country, the government did not have the ability at that point.
"We need to prevent a crisis like this from ever happening again. ... You know, this crisis was enormously damaging to the basic lives, businesses, people across the country, across the world, and our basic obligation and our core mission is to make sure we put in place safeguards to make sure this never happens again."
Watch Terry Moran's full interview with Timothy Geithner on "Nightline" tonight at 11:35 p.m. ET
The debate over the regulatory package, which includes new executive powers and a new government regulatory agency, began even before its official rollout today. Consumer groups hailed the proposal as providing important new protections, while Republicans on Capitol Hill and lobbying groups voiced opposition to the government expansion.
The Treasury secretary addressed those criticisms and returned to the roots of the financial meltdown, saying banking executives showed "stunningly bad judgment" in the lead-up to the crisis.
"I believe it would have been better, but we would still have faced enormously power financial crisis at that point," he said. "And it probably would not have saved us, still, from a very deep recession and a risk of substantial further failure across the financial system.
Geithner said the administration's regulatory package would ensure against future crises. The package, he said, sought to address three key objectives: protecting consumers, reigning in banks and providing for new oversight of international markets.
"The first [objective] is we need to give consumers better protections against the risk they get taken advantage of, sold products they didn't understand, take on too much debt, debt they can't afford," the Treasury secretary said. "That is critical.
"The second is to make sure that banks can't take on this much risk and other institutions can't take on risk that threatens the basic fabric of the economy. And so we've put in place much stronger protections, safeguards, stronger constraints on leverage, capital requirements, shock absorbers to reduce the risk that ever happens again.
"And the third, because we're not going to be able to prevent risk-taking everywhere, we're not going to be able to prevent all crises in the future, we need to have better capacity to manage them, so we're proposing new authority -- not just here but with other countries -- to better manage the failure, potential failure of large institutions."
Republicans have argued that with the president and lawmakers already bogged down with health care matters and the auto industry, there is too much being done, too quickly. Lobbyists for the financial sector said the plan would impose unnecessary and damaging new strictures on business.