U.S. to unveil new "too big to fail" strategy

U.S. Treasury Secretary Tim Geithner (R) listens as U.S. President Barack Obama announces new small business lending initiatives during a visit to an archive storage company in Landover, Maryland October 21, 2009.

WASHINGTON (Reuters) - The Obama administration will soon make public a new approach to dealing with so-called "too big to fail" financial firms that would make it easier for the government to seize control of them and make major changes, an administration official said on Monday.

The strategy would make it easier for the government to oust managers, wipe out shareholders and restructure the firm's outstanding loans, the official said.

Separately, a White House official said President Barack Obama will outline principles on the issue to Congress soon.

"In the coming days, the president will send a letter to Chairman Dodd and Chairman Frank setting out principles to guide the process," the official said, referring to House of Representatives Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd.

A council that includes U.S. Treasury Secretary Timothy Geithner would help set policy for dealing with troubled financial firms under the White House plan, CNBC television said, citing sources.

The Federal Deposit Insurance Corp would have authority to unwind large firms whose failure could threaten the overall economy, said the TV business news channel.

"Resolution authority," or empowering the government to deal with large troubled firms that are not banks, is crucial to reforming financial regulation, lawmakers and Obama have said for months since last year's severe financial crisis.

The president wants to avoid another episode like the Bush administration's frantic and confused efforts in 2008 to address crises at former Wall Street giants Lehman Brothers and Bear Stearns, former mega-insurer American International Group, and other firms that got massive taxpayer bailouts.

(Reporting by Kevin Drawbaugh, Patricia Zengerle, Rachelle Younglai and Karey Wutkowski; Editing by Andrea Ricci)