By ANNE FLAHERTY and JIM KUHNHENN, Associated Press Writer Anne Flaherty And Jim Kuhnhenn, Associated Press Writer – 12 mins ago

WASHINGTON – President Barack Obama's plan to increase oversight of banks and other financial institutions met with skepticism on Capitol Hill on Thursday, where senators sharply questioned whether it was enough to prevent another economic meltdown.

The lack of a ringing endorsement suggests the proposal was headed for a rewrite by a Congress sensitive to voter frustration with the government's handling of the economy.

"They're very angry, and they are worried. And they are wondering who's looking out for them," Sen. Christopher Dodd, chairman of the Senate Banking Committee, said of his constituents.

In testimony before the panel, Treasury Secretary Timothy Geithner defended the proposal as the nation's best shot.

"It will be very hard, perhaps impossible, for any authority, any individual to anticipate and pre-empt all potential sources of future risk," Geithner said.

Lawmakers mostly agreed that change was needed to streamline federal regulation and fill in oversight gaps believed to have contributed to the housing and credit crisis. Several Democrats also lauded the proposed creation of a new consumer-protection agency that would police the market for deceptive business practices in such financial products as credit cards and mortgages.

But members on both sides of the aisle questioned whether the administration was putting too much faith in the Federal Reserve.

Under Obama's plan, the Fed would oversee institutions deemed so big or influential in the market that their failure could seriously damage the economy.

A council of federal regulators, including the Fed, would help monitor the market for risk. But the Fed would ultimately be accountable for ensuring companies don't make overly risky bets.

Several lawmakers have suggested tasking the council of regulators with the job and criticized the Fed for its role in the recent crisis.

"The reality is they (the Fed) had the knowledge and authority to address the mortgage problem long before it became a crisis, and they didn't act," said Sen. Robert Menendez, D-N.J.

Other lawmakers questioned whether the Fed could become an effective super-regulator while retaining its role as the nation's central bank and setting monetary policy.

"I do not believe that we can reasonably expect the Fed or any other agency to effectively play so many roles," said Sen. Richard Shelby of Alabama, the top Republican on the Senate panel.

Geithner said the Fed was the best option because it was the only institution with the capacity and expertise to monitor the "too big to fail" firms. Giving the power to the council of regulators could delay action in a crisis, he added.

"You cannot convene a committee to put out a fire," he said.

Geithner also noted that the plan would strip the Fed of its role in overseeing consumer protections in setting up an agency focused solely on the mission.

However, it is likely that the Fed will mount a defense to keep its consumer oversight duties. Fed officials believe their oversight of mortgages, credit cards and other products fits well with their duties to regulate banks, and that they have the right mix of experts — economists and lawyers — already on hand to do the job.

Other details of the plan were also scrutinized. Democratic Sens. Charles Schumer of New York and Jon Tester of Montana pressed Geithner on why the administration did not seek greater consolidation of regulatory agencies.

"A multiplicity of regulators tends to produce less oversight overall," Schumer said.

Geithner conceded the regulatory system is not ideal. But, he said, it would have been a politically difficult task.

"We did not want to put you in a position of having to spend a lot of time on changes that may be desirable, that may leave us with a neater system, maybe a more efficient system, but were not central to the cause of the problem," he said.

Democratic leaders have committed to pushing through reform legislation by the end of the year.

The ambitious timetable — Dodd is simultaneously trying to shepherd an overhaul of the nation's health care system — has some members worried about missteps. Others lawmakers say Congress has no choice but to act quickly so as to prevent another crisis.

"If we mess this up, the unintended consequences for not only our economic recovery but the overall long-term financial stability for the world is really at stake," said Sen. Mark Warner, D-Va

While I actually agree that something has to be done and possibly the best source we have to oversee all this is probably the federal reserve but I can't help thinking...

The government is how many trillions in debt and this is who we have to trust to make sure banks don't take on risky investments? Just feels wrong

Groan ...

Here is my take on all of this. I'm sure everyone knows my stance on the fed.

The Federal Reserve is a government institution that has a chairman appointed by the president. However, there are several reserve banks around the nation that are controlled by those banks in their districts. For example, the San Francisco board is comprised of banks in the western district. These banks are those that are "too large to fail" and have an enormous impact on fiscal policy such as the printing of money.

These same banks are the ones that are deemed necessary to be regulated. So basically, those banks that are needed to be regulated are being regulated by a board comprised of themselves. Sounds fun, huh.

The problem with this "risky" behavior is that it is all comprised of essentially two groups with a very small portion of the population in the middle: those that understand the inner workings of finance and those that do not. Regulation does not stop those that have that knowledge, only those that do not and cannot work around the blocks. Every new tactic on Wall Street has been initiated by these financial elite that know exactly the limits of the system and how to manipulate them to their benefit. Regulation does not stop this as it is not pre-emptive; it only comes in after the fact as they are attempting to do now.

The answer, is fear. Right now, they have nothing to fear. If they risk it all and lose out, the government is going to be there to catch their fall. That is the wrong mentality and completely against both the ideals of capitalism and its self-healing nature. They need to fall. If the financial world was allowed to watch a major contender fail, they will second-guess their own tactics and make sure they are not making the same mistake. It's simple business practice. If there is no net, they will try harder not to fall.

All in all, the plan is a power-grab by the administration and will do nothing to stop this from happening again. After all, the Federal Reserve is the one that printed all that money the banks loaned out so foolishly. They are the root in all of this. If the Fed had not printed that money, the banks would have lent to tier I, then tier II, and so on until they ran out. Those at the bottom of the barrel would never have been a part of this and we would not have experienced the artificial "boom" we did that was based on flat currency. The Fed must go. While I do not entirely trust the government, they are the only entity that can even come close to fairly distributing and maintaining a flat currency (though something with value moderates itself).

Also, does anyone else find it absolutely hilarious that Frank and Dodd are the ones in the committee pledging to push this through ASAP? I mean, can you pick two senators more at fault?