Sen. Richard Shelby (R-Ala.), the top Republican on the Senate Banking Committee, said Democrats' financial overhaul bill includes a "backdoor way" for bailouts.
In a letter to Treasury Secretary Timothy Geithner, Shelby said the bill crafted by Sen. Chris Dodd (D-Conn.) has promising provisions, but he is concerned that it perpetuates taxpayer bailouts.
"It does not end the problem of 'too big to fail' and will not end the associated moral hazard," Shelby wrote.
Shelby said the bill gives emergency powers to the Federal Deposit Insurance Corporation (FDIC) and Treasury Department to support firms with broad guarantees.
"This broad authority would give the FDIC and Treasury a backdoor way to prop up failing institutions," Shelby wrote.
The Treasury Department and Democrats say ending the notion that some companies are "too big to fail" is one of their chief goals in the financial overhaul. They argue their legislation ends taxpayer-funded bailouts. The Senate bill creates a $50 billion industry-supported fund; the House bill would create a $150 billion fund supported by the industry.
Shelby said he remains committed to crafting a bipartisan financial overhaul. The bill is pending before the Senate, after the banking panel approved the legislation Monday night on a party-line vote.