Geithner defends plan to step up oversight

WASHINGTON -- Treasury Secretary Timothy Geithner says it is clear that the government could have done more to prevent the economic downfall.

In prepared testimony, Geithner says that gaps and weaknesses in the regulatory framework governing banks and other financial institutions "presented challenges" to the government's ability to monitor and address risky market bets.

One problem, he says, is that no single regulator saw its job as protecting the economy and financial system as a whole.

The administration's plan, which Geithner outlined Thursday before the Senate Banking Committee, calls for the Federal Reserve to do that job supported by a new council of regulators.

In his prepared testimony, Geithner says the Federal Reserve is best suited to become a super-regulator.

Some lawmakers want to give the job to a council of regulators. The administration has proposed creating such a group, but says it wouldn't be an effective "first responder" in a financial emergency.

In testimony before the Senate Banking Committee, Geithner told lawmakers "you don't convene a committee to put out a fire."

Sen. Christopher Dodd, chairman of the committee, said Thursday ahead of the meeting that protecting consumers should be a top priority when overhauling the regulatory framework that governs banks and other financial institutions.

Dodd said people were hurting and angry from the economic downturn and that "someone should have their backs."

The Connecticut Democrat also says that regulators must be empowered and that gaps in oversight should be eliminated.

Dodd has committed to trying to push through oversight reforms by the end of the year.