WASHINGTON — The Obama administration wants to overhaul the country’s financial rule book by giving the Federal Reserve increased powers but, bowing to critics in Congress, is backing away from proposals to consolidate various regulatory agencies.
The administration’s overhaul plan would make the Fed a systemic-risk regulator to oversee large institutions whose failure could threaten the stability of the entire system.
It also would create a council of regulators with broad coordination responsibility across the financial system, administration officials said.
The administration also will offer a stronger framework for investor protection, including increased oversight of consumer products ranging from credit cards to annuities, officials said.
Speaking in New York on Monday, Treasury Secretary Timothy Geithner said the regulatory overhaul will eliminate “gaps” in the financial system that encouraged risky behavior leading up to the meltdown.
“We had a financial system that was fundamentally too unstable and fragile, and it did a bad job of basic protection of consumers and investors,” Geithner said during an economic conference hosted by Time Warner Inc.
The administration’s regulatory proposals were included as part of an opinion piece by Geithner and Lawrence Summers, director of the president’s National Economic Council, published Monday in The Washington Post.
The administration has backed away from a more extensive overhaul that would have consolidated all banking regulation into one agency.
Supporters of this approach, including Sen. Chuck Schumer, D-N.Y., have argued that the current system is inefficient.
A proposal to merge the Securities and Exchange Commission and the Commodity Futures Trading Commission also has been abandoned.
The White House said Monday that the president would unveil his regulatory overhaul plan Wednesday.
