While testifying on the federal institution rescue plan, Treasury Secretary Henry Paulson today repeated calls for creation of a federal insurance regulatory system.

Paulson said at a financial crisis hearing organized by the Senate Banking, Housing and Urban Affairs Committee that he supports shifting to an optional federal charter system, which would give insurers a chance to choose between being regulated by a new, federal insurance regulatory agency, or by the current state insurance regulatory agencies.

Paulson referred to the Treasury Blueprint on Financial Modernization, a report released in March that calls for creating an OFC system.

Passing an OFC bill will take time, Paulson said.

Paulson appeared mainly to lobby for prompt action on his request for the authority to spend up to $700 billion over the next 2 years to buy troubled securities from U.S. and foreign financial institutions.

Paulson asked committee members “to enact this bill quickly and cleanly, and avoid slowing it down with other provisions that are unrelated or don’t have broad support.”

Ben Bernanke, chairman of the Federal Reserve Board, also appeared to testify in support of the bailout bill.

The financial system “continues to be very unpredictable, and very worrisome,” and inaction could lead to a recession, Bernanke said.