WASHINGTON — The Obama administration is pulling back from some of its most ambitious ideas for overhauling the financial system after determining that the consolidation of power under fewer federal agencies would face grave opposition by lawmakers and regulators, sources familiar with the discussions said.
Although the unveiling of the plan is a week away, several central elements have already been pummeled in public by lawmakers, wary of the concentration of authority in few hands, and in private by some economists and financial executives consulted by senior officials.
The administration had originally sought to eliminate turf wars among agencies and gaps in their oversight, for instance by centralizing the power to oversee banks in one body and combining the two agencies that police financial markets.
Those proposals have fallen by the wayside, the sources said.
Instead, the administration increasingly is focused on adding new layers of regulation on top of old.
Officials are planning to empower the Federal Reserve with new powers to manage risk across the financial markets but are considering setting up a council of regulators to keep the central bank in check.
The plan’s evolution reflects the administration’s revised judgment that some changes, while desirable, do not get at the causes of the financial crisis, while other elements, such as the elimination of entire agencies, would be rejected on Capitol Hill.
What remains, however, would still be the most sweeping overhaul of financial regulation since the Great Depression.
