Financial Overhaul Bill Gets Wary Reception

Treasury Secretary Timothy Geithner speaks during the Securities Industry and Financial Markets Association conference, Tuesday, Oct. 27, 2009, in New York. (AP Photo/Frank Franklin II)

(AP)

An Obama administration plan to dissolve large, struggling financial firms rather than bail them out is encountering Republican resistance, Democratic doubts and only qualified support from regulators.

At a House Financial Services hearing Thursday, lawmakers from both parties worried that the proposal would give regulators and the executive branch unprecedented power.

"I'm not a man that fears this administration or you," Rep. Paul Kanjorski, D-Pa., told Treasury Secretary Timothy Geithner. "But I do fear the accumulation of power exercised by someone in the future that can be extraordinary."

Others argue that by singling out financial firms important to the economy, the government could inevitably set itself up to bail them out, and that even dismantling rather than rescuing them would take taxpayer money.

"Apparently, the `too big to fail' model is too hard to kill," quipped Republican Rep. Ed Royce of California.

Rep. Brad Sherman, D-Calif., called the bill "TARP on steroids," referring to the government's $700 billion Wall Street rescue fund.

"You've got permanent, unlimited bailout authority," he told Geithner.

Geithner disagreed.

"The only authority we would have would be to manage their failure," he told the committee.

The debate comes as Congress works on legislation to respond to the financial crisis that clobbered Wall Street last year and fed the recession.

For the committee's chairman, Rep. Barney Frank, D-Mass., who wrote the proposal in close coordination with Treasury, the broad skepticism illustrates the delicate work needed to tackle such a big task.

The legislation would let federal regulators identify and monitor big financial firms and step in to wind them down before they collapse. If the government must use taxpayer money to dissolve a company, Treasury would recoup those costs by imposing a fee on firms with assets of at least $10 billion.