From the Washington Post:

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury's role, are still in flux.

The administration's proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed's other responsibilities, particularly its control over monetary policy.

The government also would assume the authority to seize such firms if they totter toward failure.

Naked Capitalism brazenly calls this a Trojan Horse:

AIG, poster child of insufficient regulation, was overseen at the parent level (which is where the black hole creating Financial Products unit sat) by the Office of Thrift Supervision (no joke), which is an agency of the Treasury! So the Treasury is acting like it needs more authority to prevent future AIG's when its own agency was responsible for the doomsday machine part of AIG.

Yves Smith, (from NC), suggests:

Given the lack of any mention of a special resolution regime, or intent to develop one, the point of this bill is NOT, appearances to the contrary, to be able to put more firms into receivership. It is to get broader authority to bail them out.

To back up Naked Capitalism's accusation this plan is simply a Trojan Horse to bail out even more institutions is this paragraph in WaPo:

Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG's most troubled unit.

On the other hand, would it allow all of those CDS contracts to then be broken?

It's quite clear the United States needs authority on the level of the FDIC powers to seize insolvent financial institutions which are not officially banks, yet is this really the way to go? To give the Treasury, or the Federal Reserve even more power considering the disasters we have impending and the lack of consideration for plans recommended by so many economists (such as a temporary nationalization plan such as Sweden enacted)?

There is a Congressional Hearing today with Treasury Secretary Geithner as well as Federal Reserve Chair Bernanke. Most strange is such a request for expanded powers would be discussed at a Wall Street Journal forum and should assuredly be in the public view.