Senators question regulatory reform plan

WASHINGTON, June 18 (UPI) -- U.S. senators questioned the wisdom of strengthening the Federal Reserve Thursday as Treasury Secretary Timothy Geithner pushed a plan for regulatory reform.

Geithner said a new system was needed to prevent an accumulation of financial risk in a modern market place.

Government supervision "didn't prevent the emergence of large concentrations of risk," Geithner told members of the Senate Banking Committee.

Chairman Christopher Dodd, D-Conn., said a Consumer Financial Protection Agency, one of the proposals, "would have stopped this crisis before it started," but said the Fed has already fallen short in its protection of the economy.

Republicans questioned the wisdom of diverting the Fed from its primary tasks of regulating inflation through its lending policies, The Washington Post reported.

Sen. Charles Schumer, D-N.Y., was not overly enthusiastic, but said, "I tend to agree that the Fed is the best answer, though there are no great answers."

Schumer then called the concept of a committee to oversee systemic risks "a formula for disaster."

Defending the concept, Geithner said, "none (of the current regulators) was assigned to look out for the system as a whole."

In his prepared statement, Geithner pressed for legislators to act while before the political will for meaningful reform subsides. "We cannot afford inaction," he said.

His afternoon appearance before the House Financial Services Committee was postponed, the newspaper said.