The Obama administration proposed an expansive plan Wednesday to revamp how the nation regulates its financial system and protects its consumers.

The 88-page proposal would give broad powers to the Federal Reserve Board to oversee all companies that could jeopardize the financial system, even if they aren't banks. It would ensure financial institutions have enough cash on hand to cover crises and would create a national supervisor to oversee the USA's banks.

The president's plan would also rein in the freewheeling market in derivatives -- complex agreements whose value rises and falls according to movements in interest rates, credit ratings or securities indexes.

At the heart of the White House proposal: a Consumer Financial Protection Agency (CFPA) that would thin the alphabet soup of agencies that keep companies from abusing borrowers, savers and debtors.

"We're proposing a new and powerful agency charged with just one job: looking out for ordinary consumers," the president said Wednesday at the White House.

The agency "may be the most important step we can take to prevent another economic crisis from developing, because this agency would keep dangerous products such as predatory subprime mortgages off the market before they could create broad systemic risks," says Sen. Dick Durbin, D-Ill.

The CFPA would enforce laws that protect consumers from unfair practices, such as the Truth in Lending Act and the Home Mortgage Disclosure Act -- laws that are now enforced by different agencies.


The new agency would not regulate consumer-protection laws dealing with securities, such as stocks and mutual funds. The Securities and Exchange Commission would continue to regulate those. The CFPA also wouldn't encroach on laws protecting investors in the futures markets.

"It's one of the biggest things since deposit insurance," says Ed Mierzwinski, consumer advocate for U.S. Public Interest Research Group. "We'd have one regulator, not seven, for consumer protection."

The CFPA would set a floor for minimum consumer protection. States could set a higher bar.

"We will still suffer with 50 different laws in 50 different states regulating mortgage lending," says John Courson, president of the Mortgage Bankers Association.

Congress will have objections, too. "I strongly believe we need enhanced consumer protection," says Sen. Mark Warner, D-Va. "But I don't know whether creating a whole new consumer-protection bureaucracy is the right answer."

The Obama administration will have to take a strong stand against industry opponents to get the CFPA launched, says Barbara Roper, director of investor protection for the Consumer Federation of America. "That would be change I could believe in."