Treasury Secretary Timothy Geithner said Tuesday that the Obama administration will not propose empowering the Federal Reserve Board to take sole responsibility for handling systemic risk, saying that the job is too complex for just one agency.
In his comments to a Senate panel, Geithner hinted that he would support a regulatory council — an idea suggested by Federal Deposit Insurance Corp. Chairman Sheila Bair in April.
"I think a council has a lot of merits in that context, and I don't believe that it's necessarily desirable for us to concentrate all authority for dealing with future risks to the system in one part of our complicated governmental structure," Geithner told the Senate Appropriations financial services subcommittee. "We are not going to propose to concentrate all authority for systemic issues in only one place — it's too complicated, really, to do that."
Geithner also said the administration's regulatory revamping plan, which is expected to be announced by President Obama next week, would not include a blueprint for restructuring Fannie Mae and Freddie Mac.
Instead, he said the administration plans to go over its options with Congress but put off deciding on the government-sponsored enterprises' future.
"The future of GSEs, including Fannie and Freddie, is an important challenge for us, but … we are not going to recommend in our initial proposal precisely what we think the future of them should be," he said.
Geithner's comments came in a round of questioning led by Sen. Dick Durbin in which the Treasury secretary ducked pressure to endorse banking-related legislation being pushed by the Illinois Democrat, such as mortgage bankruptcy reform and imposing rate caps.
Durbin asked Geithner whether any voluntary loan modification program, including the administration's, would ever be sufficient to minimize foreclosures unless servicers faced the threat of judges' cramming down primary mortgage debt in bankruptcy.
"It's my feeling that the previous administration and this administration has so far failed to come up with an approach that could dramatically turn around this increasing number of mortgage foreclosures," the senator said.
But Geithner urged Durbin to be patient. "This program is a dramatically different program from what was tried under the previous administration," he said. "It will take a little while longer, though, to judge whether this was as powerful as we expect it to be … . Realistically, I think you are going to still see a very challenging few years ahead for many homeowners."
Durbin also urged the administration to go beyond creating a financial product safety commission to impose usury caps on consumer credit products like payday loans and credit cards.
Geithner said he opposes rate caps.
"I do not believe those caps are a necessary part of a strong, credible consumer protection regime.," he said.
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