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Finance overhaul ‘essential,’ Geithner says

Treasury Secretary Timothy Geithner on Thursday defended the US administration’s vast regulatory overhaul plan as “essential” in averting or containing future financial crises.

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Geithner appeared in Congress a day after President Barack Obama unveiled the wide-ranging program to reform financial market rules in the most sweeping overhaul since the 1930s.

The plan has already drawn fire for being too ambitious, but others have argued the plan does not go far enough in streamlining regulations and protecting against unsound financial practices.

But Geithner said the brutal financial meltdown should lead to action now to avoid the same type of crisis in the future.

“Every financial crisis of the last generation has sparked some effort at reform. But past efforts have begun too late, after the will to act has subsided,” he told the Senate Banking Committee.

“We cannot let that happen this time. We may disagree about the details, and we will have to work through those issues. But ordinary Americans have suffered too much; trust in our financial system has been too shaken; our economy has been brought too close to the brink for us to let this moment pass.”

Geithner said the administration consulted with lawmakers, regulators, consumer advocates, business leaders, academics and the broader public before drafting its plan.

“We considered a full range of options and decided that now is the time to pursue the essential reforms, those that address the core causes of the current crisis; and that will help to prevent or contain future crises,” he said in a prepared statement.

“Let me be clear, our plan does not address every problem in our financial system. That is not our intent. It does not propose reforms that, while desirable, would not move us towards achieving those core objectives and creating a more stable system.”

The reforms, which require approval by Congress, will inject the government deeper into the finance sector in a bid to tame the recklessness that saw a mortgage meltdown tip the world into deep economic crisis.

They are the latest attempt by the Obama administration to heal the US economy and ensure it never again pitches into such turmoil.

The regulatory reforms join a massive array of housing, banking, mortgage and credit card reforms, a 787-billion-dollar stimulus package and managed auto firm bankruptcies adopted by Obama since taking office in January.

In a speech at the White House on Wednesday, Obama blamed a “culture of irresponsibility,” a Great Depression-era regulatory system, reckless executive compensation, excessive debt and markets awash in new and risky financial products for sparking the crisis.

“An absence of oversight engendered systematic, and systemic, abuse,” Obama said.

The proposals would give the Federal Reserve expanded powers to oversee regulation on all finance firms or banks that pose a significant systemic risk to the wider financial infrastructure.

They would introduce new discipline and transparency into financial markets and would enable investors to better ride out the failure of one or more large financial institution.

The reforms will include the creation of a Consumer Financial Protection Agency to shield Americans from the extremes of credit, savings and mortgage markets.

The Office of Thrift Supervision — one of several federal bank regulators — would be abolished under the reform proposals.

Some Obama critics, hoping for a top-to-bottom reconstruction of the tainted financial system, complained the overhaul did not go far enough, while others said it would require too much government intervention in the economy.

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