A senior U.S. Treasury Department official said on Wednesday that the current financial crisis shows a dedicated consumer protection regulatory agency is urgently needed.

The federal government has failed in its most basic regulatory responsibility: to protect consumers, Treasury's assistant secretary for financial institutions, Michael Barr, said in prepared testimony for delivery to the U.S. House of Representatives' Energy Committee.

He described the current regime as a fragmented system of regulation designed for failure that lets financial firms shop for the supervisory agency that will be least restrictive.