U.S. President Barack Obama will succeed at winning core reforms to improve consumer protection and financial system stability despite a "tremendous fight" on the issue in Congress, Treasury Secretary Timothy Geithner said on Wednesday.
In an interview with National Public Radio, Geithner said there was broad support on Capitol Hill for the core reforms and resistance from the financial community underscored the importance of pursuing the changes.
"We are having a tremendous fight on the hill to bring about comprehensive reform in part because we are proposing to do things that the financial community finds inimical to their interests," Geithner told NPR in remarks published on the broadcaster's website.
"We can't afford to let the financial system go back to where it was in the peak of the boom. That would be a terrible mistake," he said.
The Treasury over the past three months has sent Congress legislative language for the most sweeping financial regulatory reforms since the Great Depression, ranging from new controls on executive pay to transparency for complex derivatives.
Two key components would create a new regulatory agency responsible for consumer protection in financial products and give the Federal Reserve broad new powers to identify and regulate systemic risk in the largest financial institutions.
Both plans have sparked controversy among lawmakers and financial industry lobbyists alike. Some existing regulatory agencies have even spoken out against the consumer protection plan, as it would take some powers away from them.
Geithner said the new consumer agency is essential for the final regulatory package, as are limits on how much capital financial institutions are required to maintain.
"It is going to require comprehensive changes in the basic rules of the game," Geithner told NPR.
He also said the administration was still looking to implement executive pay restrictions, but dismissed the idea of setting specific caps on pay and bonuses at individual firms -- a method some of his European counterparts have proposed.
"What we do need to do is make sure we're ending the process of excess bonuses not tied to risk, the kind of multiyear guarantees that helped lead to this crisis," Geithner said. "We want to make sure that pay can be clawed back if risk materializes and that we're not rewarding failure."
He said he was optimistic that financial institutions will drop their resistance to the reforms and will realize that they are not detrimental to the sector's interest.
"Ultimately, the financial community will judge these things to be in their interest too," Geithner told NPR. "They are weakened by the mistakes some of them made. They all benefit from having clearer, stronger protections; so ultimately, I think we're going to get what we need."
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