Legislation seeking this authority is expected to be sent to the Congress by the administration this week. The powers would create a new systemic risk regulator that would work in concert with Treasury and have broad oversight over all financial firms whose failure could disrupt the broader economy. Some think the Federal Reserve may be the leading candidate, though others question whether this would conflict with the Fed's other responsibilities, such as control over monetary policy. Currently, the government only has the authority to seize banks, which it exercises through the FDIC in coordination with various banking regulatory agencies. Geithner suggests that structure could be a good template for the new authority.

In addition to the authority to seize institutions, the new powers could use a range of tools to prevent collapse, according to the document seen by the Post. Other less intrusive measures could include guaranteeing losses, buying assets or taking a partial ownership stake. Under the new powers, the government will also have the authority to break contracts, such as the one that resulted in $165 million in bonuses for AIG employees.

If this authority was in place last year, the government might have been able to seize Lehman Brothers rather than just sit back and deal with the chaos that followed its collapse.

Geithner told a forum held by the Wall Street Journal, "We're very late in doing this, but we've got to move quickly to try and do this because, again, it's a necessary thing for any government to have a broader range of tools for dealing with these kinds of things, so you can protect the economy from the kind of risks posed by institutions that get to the point where they're systemic." The administration is expected to propose a new regulatory authority similar to the structure for the FDIC.

Lita Epstein has written more than 25 books including "Reading Financial Reports for Dummies" and the Complete Idiot's Guide to the Federal Reserve"