March 24 (Bloomberg) -- The U.S. must impose constraints on risk-taking at companies whose collapse could pose danger to the financial system, Treasury Secretary Timothy Geithner said.

Geithner, in prepared testimony for the House Financial Services Committee, said the regulatory system must be fixed after it failed to rein in excesses at American International Group Inc. and other companies that caused “grave damage” to the economy.

“All institutions and markets that could pose systemic risk will be subject to strong oversight, including appropriate constraints on risk-taking,” Geithner said. “Regulators must apply standards, not just to protect the soundness of individual institutions, but to protect the stability of the system as a whole.”

The testimony was posted on the committee’s Web site.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net

Last Updated: March 24, 2009 09:15 EDT