U.S. President Barack Obama Wednesday unveiled new "rules of the road" for the nation's outdated financial system, the most significant regulatory transformation since the Great Depression in 1930s. , Xinhua reported.
Under the plan, the government will make the Fed a systemic risk regulator to oversee large institutions whose failure could threaten the stability of the entire system.
It also will create a council of regulators with broad coordination responsibility across the financial system. The council will discuss systemic risks but the Fed will not need its approval to act against them.
Hedge funds, derivatives and consumer mortgages, all blamed for the current crisis, will thus be under the supervision by the government.
And institutions that originate loans would be required to retain 5 percent of the credit risk when the loans are turned into securities.
"While this crisis had many causes, it is clear now that the government could have done more to prevent many of these problems from growing out of control and threatening the stability of our financial system," said the 85-page white paper released by the Obama administration.
In a speech at the White House, Obama said the current crisis is due to "a cascade of mistakes and missed opportunities" which took place over several decades.
"A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory regime basically crafted in the wake of a 20th century economic crisis -- the Great Depression -- was overwhelmed by the speed, scope, and sophistication of a 21st century global economy," he said.