WASHINGTON — Far from reaching consensus on a drive to overhaul the regulatory structure of the financial system, policymakers appeared to be heading in different directions on the topic Wednesday, with some pushing for much narrower reform while others wanted to take broader steps.

At a Senate Banking Committee hearing, Sen. Bob Corker argued against enactment of sweeping legislation granting the government new resolution powers over systemically important companies. Instead, he said, Congress should give the Treasury Department this authority on a case-by-case basis. For instance, the Tennessee Republican said lawmakers could pass a bill allowing the government to seize just American International Group Inc.

"I think if you came to us on a one-off basis, that would pass," Corker said.

Chris Dodd, the panel's chairman, said he was open to the idea, but Treasury Secretary Timothy Geithner was cool to the approach. "It's hard to do as a one-off thing," Geithner said. "It needs to be designed for a range of circumstances."

Corker's idea was just one of several floated during the hearing, where Sen. Richard Shelby, the lead Republican on the panel, said there needed to be sweeping reform of the Federal Reserve System as part of any regulatory overhaul. In a heated question-and-answer exchange with Geithner, Shelby opposed any plan that would give the central bank more power to oversee systemic risk, and said conflicts of interest at the 12 Fed banks need closer study.

"An inherent web of conflict is built into the DNA of the Fed as it now exists," Shelby told Geithner. "You propose to complicate the web further by making the Fed the systemic risk regulator."

Recent events have highlighted concerns over whether the Fed's structure is outdated. Stephen Friedman, the chairman of the Federal Reserve Bank of New York, resigned this month after questions arose about potential conflicts of interest. He is a former top executive at Goldman Sachs & Co., which is now regulated by the New York Fed, and remained on the holding company's board of directors while also serving at the New York Fed.

Some Fed bank directors are chosen by the member institutions, which are regulated by the central bank.

"When banks have a role in selecting who their regulators are going to be, that seems a problem in the making," Shelby said.

Geithner said he was open to scrutinizing every regulator as part of reform, including the Fed.

"We are going to have to take a comprehensive look at every avenue of our system, the full mix of authorities, how supervision is conducted," he said. "It will require not just legislative changes like we are discussing via this policy and this committee. It will require that we fundamentally re-examine how supervision is conducted. And where there are appearances of conflict, where actual conflicts across the system" exist, "we'll want to carefully look at those and fix the system."

But then Geithner, a former New York Fed president, took pains to defend the Fed system, saying the central bank has policies in place to block any conflict of interest. "I just want to say the Fed has an enormously elaborate set of protections against any conflict," he said. "Those directors play no role in supervision, they play no role in the Fed's money programs."

Shelby did not buy that argument. He noted that Fed-supervised banks help choose new presidents of the 12 banks by their representation on the boards. "They have a role in selecting the presidents, like you," he said.

Though the Obama administration has not directly endorsed giving the Fed the power to oversee all systemically important institutions, Shelby said Geithner is attempting to use the crisis to help the central bank.

"Unfortunately the Treasury also appears to be using the … [Troubled Asset Relief Program] to advance its regulatory reform agenda by placing Secretary Geithner's prior employer, the Federal Reserve, at the apex of our financial regulatory regime," Shelby said. "I would point out to the Treasury secretary that there are serious unexamined questions regarding the Fed's failure to fulfill its pre-existing regulatory responsibilities. With that in mind I will view with great skepticism any move to give the Fed expanded authority."

The Obama administration is expected to lay out more details of its restructuring plan soon, but debates and turf battles have already begun over which agency should get what. The most advanced discussion has centered on a new systemic risk regulator and a drive to enhance the government's powers to step in when one of these companies gets into trouble.

The administration has suggested giving resolution authority for systemically important institutions to the Federal Deposit Insurance Corp., while dodging the question over which agency should actually oversee these companies.

FDIC Chairman Sheila Bair has been lobbying Capitol Hill for the power to unwind bank holding companies (the agency's current authority is limited just to banks) in addition to systemically important institutions. She has also suggested creating a systemic risk council to regulate "too big to fail" institutions, an idea popular with several Senate lawmakers. Comptroller of the Currency John Dugan, meanwhile, has opposed giving the FDIC resolution powers over nonbanks, and the creation of a systemic risk council.

Reports that the administration is considering calling for the creation of a separate consumer protection agency only served to fuel confusion. The Washington Post said such an idea was to be the focus of a meeting with senior policymakers late Tuesday, but sources familiar with the matter denied the topic even came up.

Asked about the issue on Wednesday, Geithner only repeated what he has said many times, that the administration is looking for ways to strengthen consumer protections as part of a broader reform plan.

Lawmakers also used the hearing to air complaints about Tarp. Sen. David Vitter, R-La., argued that the Treasury was violating the law by allowing repaid Tarp funds to be used for more capital assistance to banks. He pointed to a section of the law that said such funds must be used to pay down the national debt. "This is clearly contrary to the law," Vitter said.

But Geithner argued that the Treasury had leeway because of a separate provision that said it had authority to purchase troubled assets of up to $700 billion "outstanding at any one time" — effectively allowing it to recycle funds.

Vitter accused Geithner of violating the law to avoid asking Congress for more funds. "The political rationale behind it is to avoid coming back to us," he said.

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