The Obama administration is urging Senate Democrats to drop a $50 billion bank liquidation fund from a financial regulation bill.
The money has become a target of Republicans, who have branded the fund a Wall Street bailout.
A senior Treasury official said Friday the administration does not support the fund and that it is unnecessary.
Under pending Senate legislation, large financial institutions would provide the $50 billion, which the Federal Deposit Insurance Corp. would use to pay for dismantling giant failing firms.
Republicans are unified in their opposition to the regulation bill and say the fund would encourage banks to take excessive risks.
The administration instead wants the costs of liquidation to be paid by the financial industry after a firm has failed and been dismantled.
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