Lawmakers unsure Fed is up to oversight job

Geithner conceded the regulatory system is not ideal. But he said it was not necessary to streamline the system to address the financial crisis that hit Wall Street, and he suggested it would have been a politically difficult task.

"We did not want to put you in a position of having to spend a lot of time on changes that may be desirable, that may leave us with a neater system, maybe a more efficient system, but were not central to the cause of the problem," he said.

The Senate hearing also revealed philosophical cracks between lawmakers who believe the Fed is too independent and those who believe the Obama plan diminishes its independence.

Several lawmakers said they were taken aback by a proposed administration requirement that the Treasury approve emergency loans from the Fed to a troubled financial institution. The Fed can now take such emergency steps on its own.

"All of a sudden the Fed is acting more like a department of the government than an independent bank," said Sen. David Vitter, a Louisiana Republican.

Sen. Bob Corker, R-Tenn., cheekily asked Geithner whether the administration would assure Congress in writing that no one at the White House or in the administration involved in creating the regulatory plan would be in the running to be a new Fed chairman. Corker seemed to have in mind Obama's top economic adviser, Lawrence Summers, who is often mentioned as a potential successor to Fed Chairman Ben Bernanke, whose term expire at the end of next January.

"No," Geithner replied. "I don't think that would be appropriate, nor do I think it would be necessary." Then he added: "I think you expected that answer, senator."

Geithner was to testify in the afternoon before the House Financial Services Committee, but the hearing was postponed because of legislative votes.

A swift legislative endorsement of the plan could be difficult. Dodd is leading a major overhaul of the nation's health care system and the Senate also faces a debate on whether to confirm Supreme Court nominee Sonia Sotomayor.

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