The final piece of the Obama administration's wide-reaching proposals to reform the U.S. financial system has emerged, suggesting a system for regulating derivatives -- the largely unregulated investment vehicles that brought American International Group Inc. to the brink of ruin.

The U.S. Department of the Treasury has forwarded suggested legislative language to Congress. In its announcement, the administration pointed out that over-the-counter derivatives -- specifically credit default swaps -- built up "enormous risks" in the financial system and "these risks contributed to the collapse of major financial firms in the past year and severe stress throughout the financial system."

The legislation would regulate trading, tighten trading eligibility and provide market transparency for derivatives -- entities more commonly associated with investment banks than insurance companies.

This marks the last of the legislative text the administration compiled based on its June 17 "white paper" for fixing the financial sector. Such legislation is -- next to health reform -- the major priority of President Barack Obama for this congressional session. The announcement indicated the administration's intention "to pass a comprehensive regulatory reform bill by the end of the year."

Only a few parts of the reforms would deal directly with the insurance industry -- chief among them a proposed establishment of an Office of National Insurance, though its role would be more advisory than regulatory.