Geithner, Bernanke spar over who should protect consumers

WASHINGTON -- Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke squared off Friday in a public dispute on who should become the nation's top consumer watchdog.

In testimony prepared for a House hearing, Geithner said it is important to strip the Fed and other regulators of their consumer protection duties and create a new federal agency dedicated to such a mission.

Bernanke disagreed, saying the Fed is best suited to the task.

Monitoring risk and protecting consumers are "closely related, and thus entail both informational advantages and resource savings," Bernanke said.

Geithner said he welcomes debate but the stakeholders must agree to reform.

"We simply cannot afford inaction on this issue," he said.

Bernanke's push back comes as he's nearing the end of his term. After it expires early next year, President Obama will have to decide whether to reappoint him. Bernanke, an appointee of President George W. Bush, took over the Fed in February 2006.

House Democrats say they are committed to advancing Geithner's proposal, although the effort has slowed because of industry opposition.

Financial Services Committee Chairman Barney Frank, D-Mass., delayed plans to consider the proposal this month until after Congress returns from its August recess. Nearly two dozen industry groups had written to Frank objecting to the legislation and warning that it is too broad.

Frank said he believes the bill has enough support to win approval but agreed to slow down to give the opposition a chance to weigh in.

"They've invited a national debate that I want to have," he said.

The proposal to create a consumer protection agency is part of a broader overhaul of the nation's financial rules. The agency would monitor the fine print on such products as credit cards and mortgages. Such oversight is now scattered among the Fed and other agencies.

House Republicans have offered an alternative. Their bill would strip the Fed of its regulatory role and abolish the Office of the Comptroller of the Currency and the Office of Thrift Supervision. In their place would be a single regulator for depository institutions, which would include an office focused on consumer protection.