"The Federal Reserve already handles monetary policy, bank regulation, holding company regulation, payment systems oversight, international banking regulation, consumer protection and the lender of last resort function," Shelby said. "These responsibilities conflict at times, and some receive more attention than others. I do not believe that we can reasonably expect the Fed or any agency or any other agency effectively play so many roles."
Another vocal Republican critic, Sen. David Vitter, R-La., said that "all of a sudden the Fed is acting more like a department of the government than an independent bank."
The Treasury chief, though, claimed the Fed is better suited to monitor the country's largest, most complicated institutions than alternative options such as the proposed Financial Services Oversight Council, which is designed to help fill gaps in the regulatory system.
"The council will not have the responsibility for supervising the largest, most complex, interconnected institutions, and the reason for that is simple: that is a highly specialized, complicated task," Geithner said. "It requires tremendous institutional capacity and organizational accountability. Nor would a council be an appropriate first responder in a financial emergency. You cannot convene a committee to put out a fire. The Federal Reserve is in the best position to play that role."
Sen. Chuck Schumer, D-N.Y., responded that the Fed has "failed significantly" in the past, but he told his colleagues that ultimately, "you cannot let the perfect be the enemy of the good here."
Geithner's second hearing of the day, before the House Financial Services Committee this afternoon, was postponed Thursday afternoon due to votes on the House floor and will be rescheduled for a later date, according to the panel.