President Barack Obama's initiative to strengthen federal authority over financial institutions strikes a "really appropriate balance" between government control and market-based solutions, a top White House economic adviser said Wednesday.
"We are not bulldozing the whole system. We're very much starting with the regulatory structure we have and improving it," Christina Romer, the chair of the White House Counsel of Economic Advisers, said on CBS' The Early Show.
The new plan, which Mr. Obama will detail Wednesday, would increase the Federal Reserve's powers and create a new consumer protection agency for the credit market.
The measures are crucial because the "status quo can't remain," Romer said.
Critics of the plan are wary that too much government intervention would choke an already struggling industry, but Romer said just the opposite is true.
"One of the crucial things that caused the mess we're in now is lax financial regulation. … We have a firm like AIG that gets in trouble [and] we don't have the tools to deal with it. The crucial thing is to make sure we don't face this kind of crisis again."
Romer also said the new regulations will be "a sensible market-based approach," particularly in the area of capital requirements.
"Let's make sure that firms making decisions have money on the table so that they don't take excessive risks," she said.
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