WASHINGTON — The Bush administration is proposing a sweeping overhaul of the nation's financial regulatory system, combining what is now an alphabet soup of government agencies into three streamlined regulators.
The proposal is the result of a year of study by Treasury Secretary Henry M. Paulson Jr. and has the support of the president, according to Treasury officials who spoke on condition of anonymity Friday.
Under the administration's plan, which will be released in detail Monday, the Federal Reserve would get expanded power to promote stability in financial markets.
The Securities and Exchange Commission and a handful of other federal agencies -- all formed in the Great Depression or earlier -- would be restructured and have their responsibilities redefined.
Oversight of the mortgage industry would be stepped up, and states could lose some of their authority to regulate banks.
The aim of the realignment is to better oversee the financial markets and the banking system as they have evolved since the 1930s -- and avoid the kind of upheaval seen in recent months.
An outline of the proposal, first reported by the New York Times late Friday and confirmed by Treasury officials, includes short-, intermediate- and long-term changes in the country's regulatory structure.
Paulson's review began before the sub-prime mortgage crisis and subsequent financial market turmoil, but it was given new import by the near-collapse of investment house Bear Stearns Cos. and the Federal Reserve's decision two weeks ago to temporarily extend its lending to include investment firms as well as banks.
Many if not most of the changes would need congressional approval, which is far from certain. Both houses of Congress are controlled by Democrats, and this is a presidential election year, so any changes could take years.
Still, at least one Democratic leader expressed support for the administration's goals, if not necessarily its specific proposals.
"In broad outlines, we agree with large parts of Secretary Paulson's plan," said Sen. Charles E. Schumer (D-N.Y.), a member of the Senate leadership who is also chairman of Congress' Joint Economic Committee. "He is on the money when he calls for a more unified regulatory structure, although we would prefer a single regulator to the three he proposes."
