Top U.S. bank regulators spoke out on Tuesday against key elements of the Obama administration's plan to reshape financial regulation, calling some parts unneeded or disruptive.

The officials' defiance, voiced at a Senate Banking Committee hearing, came despite a warning from Treasury Secretary Timothy Geithner on Friday.

In remarks punctuated with expletives at a private meeting, Geithner urged the regulators to end their turf battles and support U.S. President Barack Obama's plan, said a person familiar with the situation on Monday.

But that seemed to have little impact on the regulators, who took issue with some of the administration's proposals to tighten oversight of banks and capital markets amid the worst financial crisis in decades and with the economy in recession.

The Obama plan aims to bring a creaking system, set up in the 1930s with regulations spread across many agencies, into the 21st century. But it has met resistance not only from banks, but from the regulators that supervise them.

The plan calls for creating a national bank supervisor by merging the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), both bank overseers.

It leaves state bank supervision to the Federal Deposit Insurance Corp (FDIC) and the Federal Reserve, an idea that some lawmakers are discussing. The plan would also create a Consumer Financial Protection Agency and give the Fed the job of monitoring systemic risk in the economy.

Do we really need three federal agencies to regulate banks? asked Senator Christopher Dodd, chairman of the banking committee, at the outset of the hearing.

John Bowman, acting director of the OTS, said: We do not support the administration's proposal to establish a new agency, the National Bank Supervisor (NBS), by eliminating the Office of the Comptroller of the Currency ... and the OTS.

He added, The OTS does not support the provision in the administration's proposal to eliminate the thrift charter.

REGULATORS STAND THEIR GROUND

Such comments marked a stiffening of regulators' opposition to portions of Obama's plan, which must undergo many more months of debate in Congress.

FDIC Chairman Sheila Bair said her agency supports a merger of OCC and OTS, but resisted other potential proposals.

She said: There is a profound risk of regulatory capture if you collapse (bank oversight) all into one agency ... We think having multiple voices can actually strengthen regulation.

At a tense, hour-long meeting Friday, Geithner told Bair, Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commission Chairman Mary Schapiro to end recent public criticism of the administration's plan and stop airing concerns over their potential loss of authority.

The Wall Street Journal, which first reported the meeting, said Geithner vented frustration over the plan's slow progress and told regulators that enough is enough.

Citing people familiar with the meeting, the newspaper also said Geithner used obscenities and took an aggressive stance in dressing down the regulators.

Treasury spokesman Andrew Williams said, We planned this meeting as a venue to deliver a tough message to regulators that we should work together to get reform done, and focus less on protecting turf.

Senator Richard Shelby, the committee's top Republican, said he hoped the regulators would not be swayed by Geithner's tirade ... Your honesty and your candor are very important.

John Dugan, comptroller of the currency, warned lawmakers the existing plan would wrongly give the Fed the right to 'override' the views of other regulators when it came to supervising very large banks.

Such a move would undermine the authority -- and the accountability -- of the banking supervisor he said.

Dugan said his office supports merging OTS and OCC.

Federal Reserve Board Governor Daniel Tarullo argued for preserving the Fed's bank oversight powers, with enhancements.

It is essential both to refocus the regulation and supervision of banking institutions under existing authorities and to augment those, he said.

(Reporting by Patrick Rucker, Kevin Drawbaugh, David Lawder, Karey Wutkowski, with Jonathan Stempel in New York; editing by Jeffrey Benkoe)

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