Geithner says recession proves financial reform needed

— -- Treasury Secretary Timothy Geithner voiced confidence Thursday that President Obama's sweeping financial reform plan would be passed by Congress this year despite growing objections by regulators and lawmakers.

In an exclusive interview with USA TODAY, Geithner dismissed critics who largely would maintain status-quo regulation of the financial system in the wake of abuses that sparked a bruising recession.

"We just went through a financial crisis that helped cause the worst recession in decades," he said. "How could it be that people are saying that we should just leave the system exactly as it is?"

Speculation has grown recently that the administration's plan is faltering. Rep. Barney Frank, chairman of the House Financial Services Committee, postponed a committee vote on a key element of the overhaul. On Tuesday, The Wall Street Journal reported Geithner had blasted top financial regulators in a private meeting for their continuing criticisms of the plan.

But noting Obama unveiled the blueprint in June, Geithner said, "We can get it done pretty close to the core recommendations we laid out."

Among other things, the plan would broaden the Federal Reserve's authority to head off risks that threaten the financial system and would create a new consumer watchdog agency to oversee mortgages, credit cards and other financial products.

The Fed has been criticized for failing to prevent the spread of the subprime mortgage crisis under its existing authority as a bank regulator. One objection to giving it an expanded purview is that it could conflict with its core mission of promoting a vibrant economy.

Geithner said the Fed's roles as financial-system overseer and setter of monetary policy would be complementary.

Meanwhile, the Fed, FDIC and other agencies have opposed the move to transfer their powers to regulate consumer finance products to a separate entity they say would lack the proper expertise.

Geithner said the turf battles are hardly surprising. "We actually agree on a lot of things, and shouldn't let small differences over turf feed the opposition," he said.