WASHINGTON -- Democratic leaders have committed to enacting by the end of the year the biggest regulatory revision to the U.S. financial system since the 1930s -- an undertaking so ambitious it has some lawmakers worried about missteps.
"We have to evaluate it, weigh it, slow it down and make sure we do it right," said Sen. Richard Shelby, the top Republican on the Senate Banking Committee. "Because if we don't, we will pay dearly."
Treasury Secretary Timothy Geithner was expected to outline the administration's plan on Thursday before the Senate panel and the House Financial Services Committee.
The proposal is aimed at filling in regulatory gaps and increasing oversight of the financial markets to prevent another economic calamity.
"We don't want to stifle innovation," said President Barack Obama in a speech Wednesday.
"But I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealings, we will actually promote a more vibrant market," he added.
Obama wants to empower the Federal Reserve to oversee the largest and most influential financial firms. He also wants to create a council of federal regulators, chaired by the treasury secretary, to monitor risk across the broader market.
A new consumer protection agency would be created to prevent deceptive practices by such companies as credit card lenders and mortgage brokers.
In an interview Wednesday with ABC News, Geithner outlined the three core elements of the package: consumer protections, safeguards against risk-taking by financial institutions, and new federal authority "to better manage ... the potential failure of large institutions."
The proposal was well-received among Democrats in Congress, who said it would prevent another round of bank bailouts and protect consumers from predatory lending practices.
"We regard this as very pro-market," said Rep. Barney Frank, who chairs the House Financial Services Committee. "Unless you have investors that are well-protected, you don't have a market."
Senate Banking Committee Chairman Christopher Dodd said there would be "some debate," but "I think we're all seeking the same results."
But a swift legislative endorsement of the plan could be difficult.
Dodd is leading a major overhaul of the America's health care system, while the Senate also faces a debate on whether to confirm Supreme Court nominee Sonia Sotomayor.
In addition to the Senate's packed schedule, several lawmakers, including Dodd, have questioned whether Obama's proposal relies too heavily on the Federal Reserve and expressed concern that the Fed, as an independent agency, doesn't answer to Congress.
"It's certainly worthy of a thorough and full-throated debate and discussion as to whether or not that's a better alternative than vesting the Fed," Dodd told reporters after Obama's speech. "There's not a lot of confidence in the Fed at this point."
Geithner told reporters at a briefing that the administration had looked at a range of alternatives to giving the Fed expanded powers and had come to the conclusion that "we do not believe there is a plausible alternative."
Turf fights among lawmakers were also likely, as the plan leaves in question who should regulate derivatives like the credit-default swaps that felled American International Group Inc.
Sen. Chuck Schumer said the Securities and Exchange Commission should have the job, calling it a "stronger regulator" than the Commodity Futures Trading Commission.
Senate Democratic aides said the plan was to take up the bill this fall, regardless of whether the House has had a chance to act.
Rep. Paul Kanjorski who chairs a House Financial Services subcommittee, said he was concerned that a rush job will hand the controls to the Senate.
"If we rush this thing too much, we won't have the opportunity for everyone to buy in," he said.
House Republicans said Obama's plan would go too far and bury the market in unnecessary regulation.
Senate Republicans were less dismissive but stopped far short of endorsing the proposal. Shelby and Sen. Judd Gregg questioned aspects of the plan but said they hoped to work with Democrats to make it stronger.