Obama Proposes Financial Regulatory Overhaul, Create New Oversight Council

In a move spurring controversy and criticism, President Barack Obama today proposed the biggest financial regulatory overhaul since the Great Depression, recommending new executive powers and a new government regulatory agency.

Obama said that the nation's economic problems were tied to a "cascade of mistakes and missed opportunities" and called for a new foundation that would house "strong, vibrant financial markets" to protect the nation from another breakdown.

Video of President Obama proposing a financial regulatory overhaul.

"It is an indisputable fact that one of the most significant contributors to our economic downturn was a unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess," the president said. "A culture of irresponsibility took root from Wall Street to Washington to Main Street."

Obama said the measures his administration is proposing would prevent another economic crisis.

VIDEO: White House Defends New Regulations

"We did not choose how this crisis began, but we do have a choice in the legacy this crisis leaves behind. So today, my administration is proposing a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression," Obama said, adding that the goal is to "restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed; in which honest, vigorous competition is the system -- in the system is prized, and those who game the system are thwarted."

The president addressed critics on both sides of the political aisle -- those who say that the administration's plan does not go far enough and those who say the plan goes too far.

"There are those who will say that we do not go far enough, that we should have scrapped the system altogether and started all over again. I think that would be a mistake. Instead, we've crafted reforms to pinpoint the structural weaknesses that allowed for this crisis and to make sure that these problems are dealt with so that we're preventing crises in the future," Obama said.

To his critics, he added, "There are also those who say that we are going too far. But the events of the past few years offer ample testimony for the need to make significant changes. The absence of a working regulatory regime over many parts of the financial system -- and over the system as a whole -- led us to near catastrophe. We shouldn't forget that."

Indirectly responding to critics who say such moves will step on the free market system that defines the U.S. economy, the president said the government's role will only be as an overseer.

"I've always been a strong believer in the power of the free market. It has been, and will remain, the engine of America's progress, the source of prosperity that's unrivaled in history," Obama said. "With the reforms we're proposing today, we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse. … We don't want to stifle innovation. But I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealing, we will actually promote a more vibrant market."

The president said this proposal was drawn from his conversations with regulators, consumer advocates, business leaders, academic experts and the broader public.

"We did not choose how this crisis began, but we do have a choice in the legacy this crisis leaves behind," he said.

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