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WASHINGTON (AFP)

Job seekers wait in line for a job fair in Chicago, Illinois. US President Barack Obama will propose sweeping reforms Wednesday aimed at averting a reoccurrence of financial turmoil that will see the Federal Reserve gaining broad powers and the creation of a national bank supervisor.

US President Barack Obama will propose sweeping reforms Wednesday aimed at averting a reoccurrence of financial turmoil that will see the Federal Reserve gaining broad powers and the creation of a national bank supervisor.

It is the first major bid to overhaul the highly complex US financial regulatory network since a home mortgage meltdown shook the foundation of the system and sent markets into a tailspin across the globe.

"We're going to make sure that we've got a systemic regulator, somebody who can oversee the entire system and, when you start seeing the kinds of risks that we saw being taken in this last crisis, that we can catch it before the crisis occurs," Obama told Bloomberg Television.

Officials told a media briefing that the US leader would propose a Financial Services Oversight Council led by the Treasury Department to oversee supervision of the financial system.

The plan is also to make the Federal Reserve the centralized supervisor of large banks and other key financial institutions, officials said.

The Office of Thrift Supervision -- a federal bank regulator and supervisor -- will be abolished under the reform proposals, the officials said.

The agency came under fire for the near collapse of insurance giant AIG, which was eventually bailed out by the government for 180 billion dollars, and the failure of Washington Mutual, the biggest bank to fail in US history.

US President Barack Obama will propose sweeping reforms Wednesday aimed at averting a reoccurrence of financial turmoil that will see the Federal Reserve gaining broad powers and the creation of a national bank supervisor.

US investment banking icon Lehman Brothers had also collapsed at the height of the financial turmoil in September.

A senior administration official said the financial oversight council would "help fill gaps in supervision and facilitate coordination of policy and identify emerging risks."

Speaking on condition of anonymity, he also said the Federal Reserve would act as "consolidated supervisor" of all large banks and other financial institutions under the reforms -- Obama's latest bid to address excesses and laxity blamed for pitching the US and global economies into crisis.

The so called "tier one" financial holding companies will be "subject to more exacting supervisory requirements and capital standards."

Currently, the Federal Reserve, the Federal Deposit Insurance Company, the Office of the Comptroller of the Currency and the Office of Thrift Supervision all oversee the financial industry.

Officials said a so-called "national bank supervisor would be set up under the plans to "conduct prudential supervision and regulation" of all federally charted depository institutions and federal branches and agencies of foreign banks.

"We want to do it right. We want to do it carefully," Obama told the CNBC financial news network, as he gave a broad outline of the plans.

A job seeker (pink bracelet) talks with a recruiter (green bracelet) during a Wall Street Pink Slip Party at a bar in New York City. US President Barack Obama will propose sweeping reforms Wednesday aimed at averting a reoccurrence of financial turmoil that will see the Federal Reserve gaining broad powers and the creation of a national bank supervisor.

"We want to make sure we're getting the best possible regulatory framework in place so that we're not repeating the mistakes of the past."

Obama also wants to set up a federal consumer financial protection agency to shield Americans from predatory practices from credit card firms, banks and mortgage markets under the revamp, officials said.

The planned Consumer Federal Protection Agency will cover credit, savings and other payment markets, one official said.

Obama will also propose to impose stringent capital and liquidity requirements for the largest and most "interconnected" financial firms, officials said.

Most of the reform proposals will have to be approved by Congress and officials said Obama was bent on implementing them this year.

"It's critical we act now. We can't afford to wait," the senior administration official said. "We can't afford to let our financial system continue to operate under a system that is inadequate."

17/06/2009 03:04:36 UST

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