Obama spells out major financial rules overhaul

WASHINGTON — President Barack Obama proposed sweeping new "rules of the road" for the nation's financial system Wednesday, casting the changes as a critically important response to the economic crisis and the greatest regulatory transformation since the Great Depression.

Obama blamed the financial crisis on "a culture of irresponsibility" that he said had taken root from Wall Street to Washington to Main Street, and he said regulations crafted to deal with the depression of the 1930s had been "overwhelmed by the speed, scope and sophistication of a 21st century global economy."

The Obama plan would give new powers to the Federal Reserve to oversee the entire financial system and would also create a new consumer protection agency to guard against credit and other abuses that played a big role in the current crisis.

Obama, speaking from the White House, attributed much of the country's current problem to "a cascade of mistakes and missed opportunities" that occurred over decades. His initiative would reverse a campaign begun in the 1980s by President Ronald Reagan to cut back on federal regulations.

Two lawmakers whose committees will play a major role said they would move quickly.

"We'll have it done this year," Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said after Obama's address.

"Absolutely," agreed Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. He joked that the White House had "threatened us with a severe chastening if we don't."

"There will be maybe some debate ... but I think we're all seeking the same results," Dodd said. He has advocated an alternative plan to strip the Federal Reserve of its regulatory role entirely and create a new consolidated bank regulator who would assume the roles that the Fed and Federal Deposit Insurance Corp. now play in helping regulate state-chartered banks. "There's not a lot of confidence in the Fed at this juncture," Dodd said.

The Fed's expanded authority and the rest of the new rules would reach into currently unregulated regions of the financial markets. An 88-page white paper released by the administration detailed an effort to change a regime that Obama's economic team maintained had become too porous for the innovations and intricacies of today's financial markets.

Obama said the plan was designed in consultation with lawmakers, regulators and the institutions it seeks to police.