Obama To Unveil Plan To Regulate Banks

President Barack Obama, speaking about banking oversight on June 16, 2009.
President Obama says the Wall Street melt-down was caused by a dangerous combination: wild risk-taking by financial institutions and a lack of government oversight.

Tuesday he said he wants to make sure it never happens again, reports CBS News chief White House correspondent Chip Reid.

"We have to make sure that we've got an updated regulatory system that hasn't been significantly changed since the 1930s," Mr. Obama said.

The president will officially roll out his long-awaited plan Wednesday. One major component: he wants to create a brand new Consumer Financial Protection Agency with "broad authority" to crack down on banks and credit card companies that engage in "unfair and deceptive practices."

The plan would also strengthen government oversight of all large financial institutions, toughen regulation of derivatives and other complicated financial instruments at the heart of the Wall Street crisis, and allow the government to take control of massive companies like AIG if their failure threatens the entire economy. But many Republicans in Congress say the plan will lead to too much government intervention and continued reliance on bailouts.

"If people like bailing out Chrysler, and if they like bailing out GM, if they like bailing out AIG, if they like bailing out Citi and all the other financial institutions, they'll love this bill," said Rep. Jeb Hensarling.

While the president says his plan will streamline regulation, some critics say it would be much more efficient to consolidate the alphabet soup of regulatory agencies - the Federal Reserve, FDIC, SEC, and others - into one or two super-regulators.

The administration did consider consolidating the agencies but rejected it in part because it had little chance of getting through Congress.

  • Chip Reid

    Chip Reid is CBS News' national correspondent.