The chairman of the House Financial Services Committee said Tuesday he hoped to begin writing legislation by early May on overhauling how the federal government regulates the nation's financial system.

But Rep. Barney Frank, D-Mass., said at a hearing that they were still at the stage of listening to different opinions on how best to make future financial meltdowns less likely. Lawmakers and witnesses questioned whether the Federal Reserve was the best vehicle to oversee a consolidated regulatory system and debated whether more regulation was even needed.

"This will be a lengthy process," Frank said.

A goal of regulatory reform is to create a systemic risk regulator responsible for monitoring financial markets and institutions in order to head off the kind of high-stakes practices that contributed to the economy's current miseries.

White House spokesman Robert Gibbs said President Barack Obama wants both financial regulation reform and a new "resolution authority" to deal with giants such as American International Group Inc. that get into complex financial trouble. He said the authority would be used "to break apart, unwind and finally resolve the issues that we face with systemic risk."

Restructuring the regulatory system, testified Steve Bartlett, president and CEO of the Financial Services Roundtable, "should be Congress's primary mission moving forward to resolve the crisis and prevent another crisis."

Tim Ryan, head of the Securities Industry and Financial Markets Association, said federal regulation should include all important financial institutions not already subject to it, such as insurance companies and hedge funds.

The Fed is frequently mentioned as best able to handle that general oversight role, but lawmakers from both parties questioned whether the Fed, which controls monetary policy and can direct federal funds to distressed markets, should get a larger oversight role.

"This so-called systemic risk regulator should not have the power to commit or obligate billions or hundreds of billions of taxpayer dollars to bailing out the so-called 'too-big-to-fail' institutions," said Rep. Spencer Bachus of Alabama, top Republican on the committee.

Rep. Melvin Watt, D-N.C., said he was "beginning to have second thoughts" about expanding the Fed's role. Rather than trying to insulate the agency's monetary policy tasks from a proposed systemic risk function, "I'm not sure if it wouldn't make more sense to go ahead and create a separate entity."

Damon Silver, associate general counsel for the AFL-CIO, said the union believed systemic oversight should be done by a coordinating body of regulators chaired by the chairman of the Fed. But he said authority for consumer protection in financial services should rest in an agency that is separate from bank regulators.

Peter Wallison, a fellow in financial policy studies for the conservative American Enterprise Institute, cautioned that "regulation is not a panacea" and cited how mortgage giants Fannie Mae and Freddie Mac were able to take risks other companies could not take because they were backed by the government. "By definition a systemically significant firm will not be allowed to fail," he said.

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