By Silla Brush | Posted: 06/18/09 12:01 PM [ET] - 06/18/09 12:00 PM EDT
Senate lawmakers from both parties raised questions on Thursday about one of the main elements of President Obama’s proposal to restructure the financial system: granting more power to the Federal Reserve.
Treasury Secretary Timothy Geithner defended the proposal and the Fed's role as a “systemic risk regulator” at a Senate Banking Committee hearing.
“I do not believe that we can reasonably expect the Fed or any agency," Shelby said, to "effectively play so many roles."
Geithner is scheduled to speak at the House Financial Services Committee on Thursday afternoon. Rep. Paul Kanjorksi (Pa.), a leading Democrat on the committee, said in prepared remarks that there are many parts of the plan that he supports, but he has lingering concerns about the Fed.
“Without denying the white paper’s many important reforms, I must reiterate my deep and profound concerns about the selection of the Federal Reserve as the primary entity in charge of systemic risk, I believe that we need someone with political accountability in this role,” Kanjorski said.
Dodd also took a swipe at the banking industry for its intentions to lobby against many parts of the administration’s plan. “The very people who created the damn mess are the ones now arguing that consumers ought not to be protected,” he said.
Democrats and Republicans raised additional concerns on many facets of the administration's proposal.
Sen. Robert Menendez (D-N.J.) said he was concerned that the administration's plan to set up a council of regulators to assess risk alongside the Fed would not have any enforcement power. “My concern is that it is basically advisory,” Menendez said. Geithner said that giving the council more power would “create the risk of more confusion.”
Sen. Jon Tester (D-Mont.) questioned whether it would still be possible to merge the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), but he also raised questions about the broader outlines of the proposal.
“I still have concerns,” Tester said. “I'm not sure that the accountability is there.”
Sen. Bob Corker (R-Tenn.) said that the plan avoided major questions on the future of Fannie Mae and Freddie Mac, as well as a merger of SEC and CFTC. “A lot of the heavy lifting wasn’t addressed,” Corker said.