Pressed further, however, he declined to offer specifics, saying he would not “speculate about what is likely to be implemented in the future.” He also responded to a similar question from Rep. Carolyn Maloney, D-N.Y., by saying he could not tell when the plan will be completed.

In his testimony, Mr. Findlay proposed that the insurance program be based on the Price-Anderson Nuclear Indemnity Act, using a combination of risk retention, risk pooling and government backstop liquidity.

“Insurance plays a fundamental role in the operation of the world's financial markets,” Mr. Findlay said. “Any coordinated effort to combat the turbulence roiling those markets should consider the potential for an insurance component.”

He explained that as long as the problems created by depressed valuation of mortgage-based assets in the capital markets remain, “no matter the volume of capital infusions, financial institutions will have a difficult time playing their critical role in the functioning of our economy.”

Mr. Findlay said a properly-structured insurance program (outlined in an accompanying sidebar article) would have significantly lesser short-term cash requirements than capital infusions. In addition, because an insurance plan would be largely funded by its direct beneficiaries, it would restore liquidity without requiring massive outlays of government funds, to the ultimate benefit of taxpayers.

“The insurance of illiquid assets would also protect financial institutions and the economy,” he said, explaining that an insurance program would provide asset holders the option to keep their securities until maturity, or until economic conditions permit the restoration of the assets' value. As a result, he said, it would not flood the market with distressed assets, which could have the effect of further depressing values.

“An insurance program would also prevent opportunistic purchases of depressed assets by predatory investors,” according to Mr. Findlay. “Furthermore, the plan provides a framework for managing risks from the securitization of assets to helping the financial services sector avoid similar crisis in the future.”

For these reasons, he added, “CIAB and its members believe that the Department of Treasury should vigorously exercise the authority granted to it in Section 102 of the Emergency Economic Stabilization Act, and establish a program to insure the value of troubled and illiquid financial instruments.”