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Treasury Secretary Timothy Geithner said Friday that a new agency focused on protecting consumers is needed because the mission currently is too scattered among various regulators.
This results in "finger-pointing in place of action," he told the House Financial Services Committee.
The administration's plan to create a Consumer Financial Protection Agency has bumped up against opposition from Republicans, industry and federal regulators.
Federal Reserve Chairman Ben Bernanke has argued that the Fed is best suited for the role.
Monitoring risk and protecting consumers are "closely related, and thus entail both informational advantages and resource savings," Bernanke said in prepared testimony.
Geithner chalked up the pushback to federal regulators wanting to protect their turf.
"With great respect to the chairman and other supervisors who are reluctant to do this, they are doing what they should, which is defend the traditional prerogatives of their agencies," Geithner said. "I think frankly all arguments should be viewed through that prism."
Rep. Ron Paul of Texas and other Republicans on the panel said it was foolish to give "unelected bureaucrats" the authority to determine what financial products are fair.
"They will be empowered to decide which credit cards we can receive, which home mortgages we are permitted to possess, and even whether we can access an ATM machine," he said.
Rep. Barney Frank, the panel's Democratic chairman from Massachusetts, said Republicans aren't being practical. Frank supports the creation of the agency but has delayed a vote on it until after the August recess to give critics a chance to weigh in.
"Ideology shouldn't be driving this," he said.
Bernanke's push back comes as he's nearing the end of his term. After it expires early next year, President Barack Obama will have to decide whether to reappoint him. Bernanke, an appointee of President George W. Bush, took over the Fed in February 2006.
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 protections.
The Obama administration counters that its proposed agency could monitor nonbank institutions too, ensuring there aren't any gaps in oversight.
The administration's plan also would tap the Fed to be the regulator of huge, globally interconnected financial companies whose collapse could endanger the entire U.S. financial system and the broader economy.
Both Democrats and Republicans on Capitol Hill are leery of giving the Fed additional powers when they think its regulatory oversight of banks and risky mortgages led to the current financial crisis.
This program aired on July 24, 2009. The audio for this program is not available.
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