Geithner says must avert future crises

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner, set to unveil the Obama administration's plan for strengthening the financial system on Monday, met key policy-makers on Thursday to plan how to avoid future crises.

In brief remarks to reporters before meeting the President's Working Group at Treasury, Geithner said it was necessary to make sure "neither the U.S. economy nor the global financial system ever again faces a crisis of this magnitude."

The group, which includes top regulators, White House advisers and Federal Reserve Chairman Ben Bernanke, gathered in a wood-paneled conference room to move forward on what Geithner said was a needed overhaul of U.S. financial architecture.

"Our agenda is to begin to shape the architecture of the financial recovery plan to help get credit flowing again and help reinforce the recovery and reinvestment plan now working its way through Congress," Geithner said.

The Treasury chief is to make the administration's proposals for reinvigorating the financial system public in a speech on Monday, though no details about when and where it will be delivered were yet available.

Geithner refused to take questions from reporters who wanted specifics about what he will announce on Monday.

U.S. stock prices rallied on Thursday on investor hopes that the proposals might include an accounting break for banks to help them avoid further steep write-downs of distressed assets.

Other officials at the Treasury meeting included Commodity Futures Trading Commission Chairman Michael Dunn, Federal Deposit Insurance Corp. Chairman Sheila Bair, Comptroller of the Currency John Dugan, National Economic Council Director Lawrence Summers, and Council of Economic Advisers Chairman Christina Romer.

On Capitol Hill, where the Senate was expected to vote on an economic rescue package worth around $800 billion later in the day, a key senator said a proposal to ease the pace of soaring home foreclosures seemed to be gaining favor within the Obama administration.

A crisis in U.S. housing is at the root of the financial crisis that has swept through the banking sector and infected the global economy, much of which is in recession.

The FDIC's Bair has proposed preventing about 1.5 million foreclosures by rewarding lenders willing to share the costs of defaults on restructured loans, which might allow more homeowners to hang on to their homes.

"What I've gathered is that the FDIC proposal has gained some traction within the Treasury," Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, told reporters.

Financial markets are watching closely to see whether Geithner's plan on Monday will include a proposal for a "bad bank" to absorb so-called toxic assets like nonpaying mortgages from banks' balance sheets.

A host of policy-makers has warned that, unless the financial system is stabilized by removing toxic assets, it will be difficult or impossible to ensure an economic stimulus program that is sported by refreshed lending will work.

(Reporting by Glenn Somerville, David Lawder and Kevin Drawbaugh; Editing by Leslie Adler)