Geithner Defends Obama Reg Reform Plan

WASHINGTON–An Obama Administration plan to consolidate financial regulators, possibly including NCUA, has started to hit bumps in Congress with lawmakers demanding to know whether the plan would really prevent another financial crisis."If we have institutions that are 'too big to fail,' have we not failed already, since they create a systemic risk?" asked Sen.Robert Menendez (D-NJ) during a Senate committee hearing on the reg reform issue. "I saw the road you traveled here in trying to deal with that in terms of trying to increase capital requirements, but is that really sufficient to get to the heart" of the matter?”Treasury Secretary Tim Geithner countered that the plan would require regulators to develop higher capital requirements, provide power to conduct an orderly unwinding of failing firms, and give a proposed consumer protection agency broad authority to write new rules, according to American Banker, an affiliate of Credit Union Journal.But several lawmakers said those powers were insufficient, and that the current financial crisis was spurred not by a lack of authority, but by the failure of regulators to use it. "Merely designating someone to do a job does not guarantee a job gets done," said Senate Banking Committee Chairman Chris Dodd (D-CT).Granting new authority versus compelling action was a critical theme during the hearing. And several lawmakers raised questions about relying too heavily on the Federal Reserve Board, arguing that it had failed to use the authority it had in the run-up to the current crisis, American Banker reported. "Giving them the power and making them act are two different things," said Sen. Jim Bunning (R-KY). "What makes you think the Fed will do it better this time around?"