US Congress takes aim at Obama’s financial overhaul


Washington : US legislators launched the first salvos Thursday in a looming battle to overhaul the country’s regulation of the financial industry after one of its worst ever crises.

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Senators voiced skepticism about President Barack Obama’s plan for strengthening the government’s oversight of Wall Street, which was billed Wednesday as the most sweeping set of regulatory reforms since the Great Depression of the 1930s.

Lawmakers took special aim at the Federal Reserve during a hearing of the Senate’s Banking Committee. The US central bank could get broad new powers to monitor those top banks that are considered critical to the health of the entire financial system.

Senator Christopher Dodd, the Democratic chairman of the committee, questioned the Fed’s “track record” after failing to prevent the current financial crisis, which has led to the country’s longest recession in 70 years.

“If the Fed and other regulators had been doing their job … they could have prevented this mess,” said Republican Senator Jim Bunning. “What makes you think the Fed will act better this time around?”

Treasury Secretary Timothy Geithner, who testified before the committee, argued the Fed was the “best positioned” regulator to take on the role. But he acknowledged the central bank may need to reform its governing structure to respond faster to crises.

The administration is seeking broad new authority to watch over all corners of Wall Street, which was brought to the brink of collapse in October by the careless risks of investors in the US housing market.

“I cannot stand here today and say it will prevent all regulatory failures in the future,” Geithner said of the administration’s proposals. But he argued it was the best set of reforms under the circumstances.

The Fed lies at the centre of the reform plans, which Obama said will help prevent another crisis from happening. Obama also proposed an “oversight council” of regulators to watch over the entire financial industry, and creating a Consumer Financial Protection Agency to guard against unfair or misleading practices from banks.

Senator Richard Shelby, the top Republican on the committee, charged that the Obama administration had a “grossly inflated view of the Fed’s expertise.”

Other lawmakers complained that the administration had scrapped plans to consolidate more of the country’s patchwork of regulators. Geithner argued that starting “from scratch” would leave the system weak for too long a period of time.

“Every financial crisis of the last generation has sparked some effort at reform. But past efforts have begun too late, often after the will to act has subsided,” Geithner said. “Our economy was brought too close to the brink for us to let this moment pass.”