Geithner urges quick action on regulation

WASHINGTON -- Lawmakers on Thursday broadly supported action to fix the nation's financial regulatory system, but cautioned that rushing the changes could do more harm than good.

At a hearing before the House Financial Services Committee, Treasury Secretary Timothy Geithner laid out the Obama administration's proposals to overhaul the nation's tangled web of financial regulation, including creating a watchdog to look over big, interconnected firms.

He asked Congress to move quickly, and members generally agreed that changes are needed — strong enough to prevent another financial meltdown while not impeding capitalism.

But a number of lawmakers argued for careful deliberation.

"In our rush to save our economy, we certainly don't want to suffocate it," said Rep. David Scott, D-Ga.

"The details are important," said Rep. Spencer Bachus, R-Ala. "Even more important is that we develop the right solution and not rush to poorly vetted legislation."

Geithner asked that Congress move "as quickly as you can," arguing the United States is "still in the midst of a very challenging period" and the government needs more tools to respond.

"This will be less costly for the economy, less costly for the taxpayer, if we're able to contain this more effectively," he said, arguing for a better "firebreak" to contain the damage.

Geithner laid out a six-step proposal to strengthen the regulatory system:

• Creation of an independent body with oversight over "systemically important" firms — large, interconnected financial companies whose downfall could have a broad ripple effect through the economy, like Lehman Brothers and AIG. Geithner also discussed the need for oversight of various government agencies to make sure there are no gaps or differences in regulation.

• Requiring firms that considered systemically important to meet more stringent requirements, such as the amount of capital they hold.

• Giving the administration authority to take over failing, non-bank financial firms just as the Federal Deposit Insurance Corp. can take over failing banks in an orderly fashion.