WASHINGTON (MNI) - U.S. Treasury Secretary Timothy Geithner Thursday put forward the government's reasons for wanting to clip the wings of the Fed, arguing that having such expanded authority to rescue firms poses a moral hazard.

In an interview on CNBC, Geithner also gave a vote of confidence in Fed Chairman Ben Bernanke, saying the U.S. is "lucky" to have him.

When asked if the government's proposed financial regulatory framework takes away the Fed's tools and ability to respond quickly in a crisis, Geithner acknowledged that the administration has proposed to "substantially" reduce a large part of the Fed's responsibilities, such as consumer protection.

He argued that this is sensible because it allows the central bank to focus "on the really important things."

Geithner added that the proposal to limit the emergency authorities of the Fed is necessary "so they don't cause more hazard, so they don't create the risk that investors and banks are living with the expectation the taxpayer will be there to save them from their mistakes in the future."

"So we are trying to get a balance that reduces their authority, has them focus on the really critical things, and limits their emergency tools so that we are not creating greater risk of future crises," he said.

Even though politicians on the Hill intend to use Fed Chairman Ben Bernanke's upcoming confirmation process as a tool to hammer the Fed on its handling of the crisis, Geithner stated his belief that Bernanke would be confirmed, adding that the administration has great confidence in him.

"We are lucky to have him in that job and the President has great confidence in him," he said.

Earlier in the interview, Geithner said the government is working hard to wean banks off government support, and with Bank of America repaying $45 billion of TARP loans, added that the government stands to earn a positive return on its investments in financial institutions.

Today's financial system is in "dramatically" stronger shape, Geithner said, and that he sees visible and concrete returns of the government's strategy to tackle the crisis.

He also noted that the U.S. economy is improving, although it remains in the healing process. Geithner also acknowledged concerns regarding the long-term federal deficit, saying it is important to get down to 3% of GDP in the medium-term.

It is also important for the global economy, the Treasury Secretary said, for the United States to return to growth. Getting the economy in order, he added, would be the best basis for supporting the U.S. dollar.

** Market News International Washington Bureau: 202-371-2121 **