UPDATE 2-Global view key to US role on failing banks-official

* US Treasury's general counsel urges level playing field

* US authority shouldn't treat U.S. firms differently (Adds comments from JPMorgan official, background)

By Emily Chasan

NEW YORK, Nov 4 (Reuters) - The proposed U.S. financial resolution authority, which would empower the government to deal with large, failing financial firms, must take care not to alter international competitive balance, a key U.S. Treasury Department official said on Wednesday.

There must be "a recognition that we have to level the playing field as much as possible, as much as we can, in the international sphere," George Madison, who has been general counsel at Treasury since September, said in comments to a Practising Law Institute conference in New York.

While proposals related to the proposed authority are still "in flux," Madison said, regulators should be "making sure U.S. institutions aren't treated too differently than foreign firms."

The resolution authority would deal with the "too big to fail" issue that plagued the Bush administration's efforts in 2008 to address crises at former Wall Street giants Lehman Brothers (LEHMQ.PK: Quote, Profile, Research) and Bear Stearns, as well as former mega-insurer American International Group (AIG.N: Quote, Profile, Research).

"We didn't have the tools to do very much with Lehman, or poor AIG, frankly," Madison said at the conference.

Under a bill being considered by Congress, U.S. House of Representatives Financial Services Committee Chairman Barney Frank and the Obama administration have proposed that financial companies with more than $10 billion in assets would be assessed under the resolution authority program.