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Treasury Secretary Tim Geithner is asking lawmakers to work with the Obama administration on their differences over how to fix the financial markets.
Secretary TIMOTHY GEITHNER (Department of Treasury): Every financial crisis of the last generation has sparked some effort at reform. But past efforts have begun too late, often after the will to act has subsided. We cannot let this happen this time.
INSKEEP: Geithner was talking with lawmakers who will now decide what, if anything, to do. In a moment, we'll hear what the administration's proposals would mean for smaller banks. We begin with NPR's Scott Horsley.
SCOTT HORSLEY: One of the biggest concerns lawmakers have about the administration's plan is the extra authority it would give the Federal Reserve to oversee big banks and other institutions. Some members of Congress worry that would interfere with the Fed's main responsibility of fighting inflation and promoting growth. Others complain the Fed isn't up to the job, or it would have prevented the current mess. Banking Committee Chairman Chris Dodd borrowed a line from Mark Williams, a finance professor at Boston University.
Senator CHRISTOPHER JOHN DODD (Democrat, Connecticut; Chairman, Senate Banking Committee): He said giving the Fed more responsibility at this point is like a parent giving his son a bigger, faster car right after he crashed the family station wagon.
HORSLEY: Kentucky Republican Jim Bunning agreed, asking: Why give the Fed more power when it barely use the authority it already had?
Senator JIM BUNNING (Republican, Kentucky): It took 14 years for the Fed to write one regulation on mortgages. What makes you think that the Fed will do better this time around?
HORSLEY: Geithner, who used to work for the Fed, says the Central Bank is better prepared to take on the task of policing big financial firms than any other government agency. And while the Fed would get some additional duties under the president's plan, some of its current responsibilities, including mortgage oversight, would be reassigned to a new consumer protection agency. Consumer protection has never been a high priority to the Fed. Geithner argued that a dedicated consumer agency would help prevent the kind of financial contagion that spread from the subprime mortgage market.
Sec. GEITHNER: Consumer protection is not just about individuals, but it's also about safeguarding this system as a whole.
HORSLEY: New York Democrat Charles Schumer conceded that the Fed may be the best agency to regulate big financial firms. His complaint is that the administration's plan does not go far enough in streamlining regulation of all those other banks.
Senator CHARLES SCHUMER (Democrat, New York): If you count the new Consumer Watchdog Agency, which I'm all for, there'd be four bodies involved in bank supervision, the same is that we started with. No consolidation. The whole is greater than the sum of its parts when it comes to this - a symphony orchestra or the New York Giants. But with our patchwork system of banking regulators, the whole is less.
HORSLEY: Geithner admitted the administration's plan is neither elegant, nor neat.
Sec. GEITHNER: I think nobody would argue, if we were starting from scratch today, it would replicate the current structure we have.
HORSLEY: But in Washington, one is never starting from scratch. Geithner and his administration colleagues decided it was more important to tackle the big problems quickly than to risk getting bogged down in the search for a more seamless solution.
Sec. GEITHNER: We wanted to make sure we were focusing on those problems that were central causes of this crisis, and that we did not want to put you in the position of having to spend a lot of time on changes that may be desirable, may leave us with a neater system - it would be a more efficient system, but we're not central to the cause of the problem.
HORSLEY: Geithner also sought to temper expectations, saying even the best regulator is likely to be blindsided by unexpected problems. The solution, he said, is to build in shock absorbers during good times, requiring capital cushions and limits on leverage, so future bumps in the financial road don't send the whole economy into a ditch.
Scott Horsley, NPR News, Washington.
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