President Obama’s hope of altering the way the nation’s financial system is regulated received a lukewarm reception in Congress earlier this month. Obama’s Treasury secretary, Timothy Geithner, faced skeptical members of the Senate banking committee, who questioned him about the administration’s proposals.
Said Geithner, “Every financial crisis of the last generation has sparked some effort at reform. But past efforts have begun too late, after the will to act has subsided.” Lawmakers insisted that their will to act would not subside before changes could be made, but many expressed their unwillingness to accept the plan in its entirety, particularly finding fault with the Obama plan to expand Federal Reserve’s authority.
Richard Shelby, a senator from Alabama and the panel’s ranking Republican, stated that he wished not “to limit the debate we are about to undertake” by accepting the administration’s recommendations whole. Shelby complained that the Federal Reserve already has too much jurisdiction and responsibilities that at times conflict.
Geithner countered that the current proposals are “modest” and built on the Federal Reserve’s existing powers. Furthermore, the Federal Reserve, said Geithner, “has a greater knowledge and feel for broader market developments than is true for any other entity in that context.” He insisted that the White House plan is “pragmatic.”
A related proposal for a new agency to protect consumers in their banking transactions was more warmly received. Committee chairman Christopher Dodd, a Democrat from Connecticut, lauded that plan and criticized banking interests for arguing that consumers need not be protected. Mr. Geithner also asserted that no firm should expect the government to step in to bail them out if they fail.