WASHINGTON — An Obama administration plan to dissolve large, struggling financial firms rather than bail them out is meeting Republican resistance, Democratic doubts and only qualified support from regulators.

At a House Financial Services hearing yesterday, lawmakers from both parties worried that the proposal would give regulators and the executive branch unprecedented power.

"I'm not a man that fears this administration or you," Rep. Paul Kanjorski, D-Pa., told Treasury Secretary Timothy Geithner. "But I do fear the accumulation of power exercised by someone in the future that can be extraordinary."

WALL STREET CRISIS

Rep. Brad Sherman, D-Calif., called the bill "TARP on steroids," referring to the government's $700 billion Wall Street rescue fund.

"You've got permanent, unlimited bailout authority," he told Geithner.

Geithner disagreed.

"The only authority we would have would be to manage their failure," he told the committee.

The debate comes as Congress works on legislation to respond to the crisis that clobbered Wall Street last year and fed the recession.

The legislation would let federal regulators identify and monitor big financial firms and step in to wind them down before they collapse. If the government must use taxpayer money to dissolve a company, Treasury would recoup those costs by imposing a fee on firms with assets of at least $10 billion.

PAYMENT DEBATE

When to create such a fund has become a significant point of contention.

The administration and committee chair Rep. Barney Frank, D-Mass., who wrote the proposal in coordination with Treasury, recommended that any taxpayer infusion be recovered after the fact from large institutions.

But Sheila Bair, head of the Federal Deposit Insurance Corp., which would conduct such a wind down, said the industry should pay into an insurancelike fund ahead of time. Rep. Luis Gutierrez, D-Ill., and AFL-CIO president Richard Trumka pressed for a similar structure.

Large financial firms, however, oppose an up-front payment. And Geithner said a prepaid fund would increase the temptation — or "moral hazard" — for companies to take excessive risks with the expectation that the government will step in to protect them.

"We don't want to create that expectation," he said.

A key element of the proposal would assemble a council of regulators to identify large institutions whose businesses and transactions are so intertwined that their collapse would damage the economy.

The legislation envisions keeping the list of those firms secret, though Geithner acknowledged that existing disclosure requirements would make it hard to hide their identities.

The Federal Reserve would have additional powers to oversee those institutions and, if necessary, step in to regulate them.

Regulators were powerless last year when investment bank Lehman Brothers and insurance giant American International Group neared collapse.

The government let Leh- man Brothers fail, helping trigger the worst financial crisis in seven decades as nervous investors withdrew funds from money markets and credit lines froze. With AIG, the Bush administration decided to swoop in with a hefty government bailout. Frank and Geithner said the latest plan would prevent the government from having to decide between doing nothing and a costly rescue.

BANK FDIC FUND

"Without the ability for the government to step in, manage the failure of a large firm and contain the risk we are resigned to repeat the experience of last fall," Geithner said.

Bank representatives said they oppose putting the FDIC in charge of dismantling failing nonbank firms. Banks pay the FDIC to insure deposits, and they don't want their premiums to pay for the FDIC's new power.

"If our fund is strong and a major nonbank fails, there will be a strong temptation to unfairly raid the bank FDIC fund to pay for it," said Edward Yingling, president of the American Bankers Association.