His plan would give broad new powers to the Federal Reserve, abolish the Office of Thrift Supervision, establish a new watchdog agency to protect consumers, and more tightly regulate hedge funds and derivatives, according to a senior Treasury Department official. The official requested anonymity because Obama has not announced details of the overhaul.

Aggressive marketing of subprime mortgages and their packaging into securities helped undercut financial systems and trigger a deep recession. The overhaul would:

•Strengthen oversight of the financial system. A "financial services oversight council" headed by Treasury would make the Fed supervisor of all big financial holding companies.

"We have to have somebody who is responsible for seeing the risks of the system as a whole and not just individual institutions," Obama told Bloomberg News Tuesday. "And we think that the Fed is best positioned to do that."

Regulators would ensure major financial institutions have sufficient capital and that high levels of executive compensation don't prompt company officers to take undue risks.

The Office of Thrift Supervision, which has been criticized for lax enforcement of savings and loans, would be replaced by a "national bank supervisor."

The new system would also force hedge funds to register and regulate money market mutual funds. A crisis of confidence in money market funds last year threatened to topple the financial system.

•Regulate complex financial instruments. Over-the-counter derivatives and credit default swaps would be regulated and sold on exchanges. Companies that bundle loans into securities would have to retain 5% of the credit risk.

•Create a financial watchdog agency. The entity would oversee a wide range of consumer products, including mortgages. The agency would ensure financial firms clearly disclose risks to consumers in plain language and don't use unfair practices.

"We've got to make sure that we have somebody who is focused and responsible for protecting consumers, whether it's on subprime loans for their mortgages, for their credit cards, that investors have additional protections," Obama said.

•Reduce risk of failing companies. The Fed would have authority to safely shut down failing financial firms so they don't threaten the entire system. Today, the government can dismantle failing banks but has no such power over non-banks. Last year, the Fed had to use its emergency powers to prop up insurance giant American International Group.