Obama Initiative Seeks Fix To Finance Regulations

Obama's proposal would require the Federal Reserve, which now can independently use emergency powers to bail out failing banks, to first obtain Treasury Department approval.

The expanded role of the central bank and the new consumer regulator were likely to be the two main areas of the political fight in Congress. Many bankers oppose a new consumer protection regulator and many lawmakers worry the Federal Reserve could become too powerful.

Working along side the Federal Reserve, but without power to overrule the central bank, would be a new council of regulators that would monitor the overall financial system with an eye to preventing the unexpected collapse of huge institutions as happened last fall with AIG, the insurance company, and the Lehman Brothers brokerage.

Obama's plan does not attempt major consolidation of regulatory agencies and does not inject itself into an ongoing debate over whether to bring some insurance companies under federal oversight.

"We don't want to tilt at windmills," Obama said on CNBC.

Obama's decision to create a consumer agency is in response to criticism that mortgage lenders and credit card companies have taken advantage of unsuspecting customers and saddled them with too much debt.