The Obama administration on Wednesday unveiled key details of a draft legislation that would grant regulators broader power to seize non-bank financial companies whose collapse could jeopardize the economy.

"The legislative proposal would fill a significant void in the current financial services regulatory structure and is one piece of a comprehensive regulatory reform strategy that will mitigate systemic risk, enhance consumer and investor protection, while eliminating gaps in the regulatory structure," said the Treasury in a statement.

The draft bill would grant the US government "resolution authority," which would allow the government to put the firm into conservatorship or receivership and then to administer its effective, orderly reorganization or wind-down.

Moreover, it would enable the government to reduce the need for taxpayer funds, said the Treasury.

For example, it would enable the federal agency acting as conservator or receiver to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution's contracts, including with its employees, and to address the derivatives portfolio, thus reducing the potential for further disruption.

Treasury Secretary Timothy Geithner called for the new power on Tuesday in testimony before the House Financial Services Committee.

"The United States government does not have the legal means today to manage the orderly restructuring of a large, complex non-bank financial institution that poses a threat to the stability of our financial system," said Geithner.

"AIG highlights broad failures of our financial system," said the Treasury chief. "We must ensure that our country never faces this situation again."

The US government currently has the authority to seize only banks. A change in the Treasury Department's authority, such as broader power over non-bank firms, would need to be approved by Congress.

Under the draft bill, the Treasury secretary would have to make "triggering determination" before invoking resolution authority.

The secretary would have to find that the firm is in danger of becoming insolvent, that its insolvency would have serious adverse effects on the economy and financial stability, and that taking emergency action would avoid those adverse effects.