WASHINGTON — A bill to be introduced in Congress by a key ally of President Barack Obama would make it easier for the US government to seize control of troubled financial institutions that are considered too big to be allowed to fail, The New York Times reported.

A protester in March of 2008 framed the question that Barney Frank, chairman of the House Financial Services Committee, and Treasury Secretary Timothy F. Geithner will try to answer this week with proposals to tighten regulation. (Chris Hondros/Getty Images) Citing a senior administration official, the newspaper said the measure would be proposed this week by Representative Barney Frank, chairman of the House Financial Services Committee, after extensive consultations with Treasury Department officials.

The legislation would make it easier for the government to throw out the financial company's management, wipe out the shareholders and change the terms of existing loans held by the institution, the report said.

Treasury Secretary Timothy Geithner was planning to endorse the changes in testimony before the House Financial Services Committee on Thursday, the paper noted.

The White House plan as outlined so far would make the existence of a large financial company whose failure would put the US financial system and the economy at risk much costlier, the report said.

It would force such institutions to hold more money in reserve and make it harder for them to borrow too heavily against their assets, The Times said.

Setting up the equivalent of living wills for corporations, the plan would also require that companies come up with their own procedure to be disentangled in the event of a crisis, the paper said.

This plan, according to administration officials, ought to be made public in advance, said The Times.

"These changes will impose market discipline on the largest and most interconnected companies," the paper quotes Michael Barr, assistant treasury secretary for financial institutions, as saying.

One of the biggest changes the plan would make, he said, is that instead of being controlled by creditors, the process will be controlled by the government.

Some regulators and economists in recent weeks have suggested that the administration?s plan does not go far enough, The Times noted. They say that the government should consider breaking up the biggest banks and investment firms long before they fail, or at least impose strict limits on their trading activities -- steps that the administration continues to reject.