Geithner calls attacks on financial reform bill 'not true'

Treasury Secretary Timothy Geithner defended the Democrats' financial regulatory reform proposals from attacks that he said were false.

Geithner, speaking at a Senate subcommittee hearing Thursday, said that opponents of the Democrats' bill have "tried to convince that these reforms will either hurt Main Street, help Wall Street or both."

"Those arguments won't work because they're not true," Geithner said.

He pushed back against suggestions by Sen. Lamar Alexander (R-Tenn.) that a new independent consumer financial protection agency that the White House favors would lead to a "czar with no boss."

Alexander said he was concerned an independent agency head could end up allocating credit to those who couldn't afford to pay it back, "which is exactly what happened with the housing agencies."

Geithner responded that the new agency would be led by someone who was confirmed by the Senate, much like those who head up the Federal Trade Commission, Securities and Exchange Commission and the Commodities Futures Trading Commission, he said.

"We're trying to take a model which is familiar to you," Geithner said.

The head of the consumer agency would focus on writing and enforcing rules against financial abuse and fraud and wouldn't have the kind of authority to give out credit that Alexander feared, Geithner said.

The version of the agency in the bill pushed by Democrats in the Senate differs slightly from the one proposed by President Barack Obama. While the president called for an agency that was completely independent, the consumer protection bureau in the Senate bill would be housed in the Federal Reserve. The Fed Board of Governors, however, wouldn't have veto power over the consumer bureau. The bureau's leader would also have to be confirmed by the Senate.

As the financial regulation reform debate has heated up in recent weeks, the Obama administration has sought to dismiss Senate GOP criticisms. 

The president himself called "cynical and deceptive" the assertion by Senate Minority Leader Mitch McConnell (R-Ky.) that the reforms would ensure future bailouts. Democrats said their reforms would lessen the odds of more bailouts by requiring banks to have more capital and by giving regulators the power to wind down failing firms before they hurt the rest of the economy.

Republicans have pointed to a $50 billion fund in the Senate Democrats' bill that could be used for bailing out collapsing firms. A GOP aide said Wednesday that Democrats have agreed to drop that provision from the legislation.