WASHINGTON - It's a Herculean task: revamping a financial regulatory system dating back to the Civil War to deal with 21st century crises imperiling the country.
Under an ambitious Bush administration plan, the Federal Reserve would take on the unwieldy role of uber cop in charge of financial market stability. Other regulatory agencies could see their influence diminished.
The proposal won't fix the host of economic and financial problems that threatens to plunge the United States into a deep recession, but it might help guard against future troubles. It would take years and a lot of political wrangling - in Congress, on Wall Street, in statehouses and elsewhere - to implement all the changes envisioned.
Yet, the initiative, formally announced Monday, casts a fresh spotlight on the best way to protect the country from financial catastrophes in an intricate web of complex, often-changing financial products and the wide array of financial players using them in the United States and beyond. That debate probably will take center stage in the next president's administration.
Asked if President Bush's goal was to get the revamp approved before he leaves office, press secretary Dana Perino acknowledged the enormity of the plan. 'We'll have to see. It is a big attempt,' she said.
Democrats in Congress said the administration should be focusing its efforts on easing the country's current woes, including providing more relief for millions of distressed homeowners clobbered by the housing collapse and credit crunch. Foreclosures have hit record highs.
'We must take steps now to provide help to families who are hurting,' said House Speaker Nancy Pelosi, D-Calif.
Senate Banking Committee Chairman Chris Dodd, D-Conn., called the administration's proposal a 'wild pitch.'
'It's not even close to the strike zone,' Dodd said. 'This is a very legitimate issue, but why bring this up today when really this had nothing to do with the current problems we're facing?'
The plan would greatly expand the role of the Fed, created in 1913 after a series of bank panics, to oversee the stability of the entire financial system including commercial banks, investment banks, insurance companies, hedge funds, private-equity firms and others.
Rather than checking on the health of a particular organization, the Fed's focus would be on whether a firm's or industry's practices pose a danger to overall financial stability, said Treasury Secretary Henry Paulson, the former head of investment giant Goldman Sachs whom Bush put in charge of the plan.
'It will have broad powers and the necessary corrective authorities to deal with deficiencies,' Paulson said.
Lyle Gramley, former Fed official and now senior economic adviser at the Stanford Washington Research Group, believes the plan isn't clear about the Fed's such corrective powers. 'If you create a police force and don't give them any weapons, it is going to be useless,' Gramley warned.