By Peter Schroeder - 04/18/12 01:34 PM EDT
Treasury Secretary Timothy Geithner is warning that if GOP lawmakers continue their push to roll back portions of the Dodd-Frank financial reform law, it could "critically undermine" the ability to prevent damaging future crises.
In a letter sent to lawmakers Tuesday, Geithner blasted a package of measures set to be considered by the House Financial Services Committee on Wednesday, including a pair that would repeal or trim key pieces of the Wall Street makeover.
"The act provides essential reforms that should not be weakened or repealed," he wrote to committee Chairman Spencer Bachus (R-Ala.) and ranking member Rep. Barney Frank (D-Mass.).
Under the reform law, regulators have the ability to step in when a large institution is failing, and temporarily tap into taxpayer dollars in order to wind down the firm without casting broader damage on the financial system.
Republicans contend the power amounts to another bailout, and grants firms the title "too big to fail." They also say they can save $22 billion by repealing it.
But Geithner maintained that scrapping that provision increases the odds that future financial crises could actually increase the deficit, as the government would be unable to reduce the contagion caused by a large failing firm. He also noted that as designed, the provision would not cost taxpayers a cent, as any cost of winding down a firm will ultimately be paid back by assessing fees on the financial industry.
He also took issue with a provision that would bring the budget of the Consumer Financial Protection Bureau (CFPB) under the control of congressional appropriators and cut its budget by more than half.
Republicans have long maintained that the current structure, in which the CFPB gets its funding from the Federal Reserve, makes it unaccountable to Congress. But Geithner said it would "significantly weaken" the ability of the bureau to protect consumers.
Another measure set for consideration would eliminate the administration's Home Affordable Modification Program (HAMP), which Republicans contend is ineffective and costly. Geithner said scrapping the program would increase foreclosures, further lower housing prices and delay the healing process in the housing market.
These measures are part of a package of bills put forward by committee Republicans as their contribution to coming up with deficit cuts that could replace the automatic defense cuts set to take effect at the end of the year. Under the budget offered by House Budget Committee Chairman Paul Ryan (R-Wis.), each committee is charged with coming up with actions under their jurisdiction that, in aggregate, could replace that sequestration.
While not under consideration by the House Financial Services Committee currently, Geithner also threw jabs at other GOP-pushed bills that would roll back portions of Dodd-Frank pertaining to derivatives, calling them "at best premature" and warning that regulators should be allowed to finish their work implementing the law before members start tinkering with it.