Washington reacts to Treasury plan

WASHINGTON, Oct. 30 (UPI) -- Lawmakers and economists have expressed doubts about a major U.S. Treasury Department proposal to regulate future financial crisis.

Treasury Secretary Timothy Geithner outlined the proposals Thursday for the House Financial Services Committee. Soon after, Federal Deposit Insurance Corp. Chairwoman Sheila Barr criticized parts of the plan, saying an inter-agency council of regulators would not have enough authority to be effective, it should not be lead by the Treasury secretary and a fund to rescue failed firms should be "prefunded," rather than assessed after a firm fails, as the Treasury proposed.

Rep. Brad Sherman, D-Calif., called parts of the reform package "TARP on steroids," referring to the $700 billion Troubled Asset Relief Program the Treasury has used to prop up ailing banks.

Rep. Jeb Hensarling, R-Texas, said the proposals "will actually institutionalize 'too big to fail,'" The Washington Post reported Friday.

Geithner countered the criticism. "It does not create permanent TARP authority," he said.

Former Federal Reserve Chairman Alan Greenspan said he agreed with a proposal to increase bank reserves. A pro-active government effort to seek firms in trouble, however, will "create a … bias toward regulatory solutions and risks that we allow political judgments rather than economic judgments to prevail."