President Barack Obama is proposing the most sweeping changes in U.S. financial regulation since the Great Depression of the 1930s. The president said he wants to avoid a repeat of the conditions that led to the current economic downturn.  

President Obama said his plan would give the U.S. central bank, the Federal Reserve, sweeping new powers to regulate the financial industry. It would also establish a consumer protection agency to guard against abuses by credit card companies and other lenders.

Mr. Obama said the current U.S. economic woes are due, in part, to the government's inability to prevent abuse and excess.

"A regulatory regime basically crafted in the wake of a 20th century economic crisis -- the Great Depression -- was overwhelmed by the speed, scope and sophistication of a 21st century global economy," he said.

Mr. Obama said it is not necessary to scrap the system altogether and start again. But, he said, the existing system should be overhauled.

"We have 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 are preventing crises in the future," he said.

However, the president said the events of the past few years show 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," he said.

The U.S. Chamber of Commerce, an organization that represents businesses across the country, said Mr. Obama's proposal would add unnecessary new layers of regulation and would not provide comprehensive reform.

Banking analyst Gerard Cassidy said tighter regulation is needed, but cautioned that excessive regulation could restrict the flow of credit.

"We have to be very careful that if we are too strict or if there are too many rules for the lenders to consumers, the lenders are just going to pull back and not make credit available," said Cassidy.

One of the main parts of the president's initiative would give the Federal Reserve new powers to regulate the financial institutions that are large enough to threaten the entire U.S. economy, if they were to fail.

"We will require these firms to meet stronger capital and liquidity requirements so that they are more resilient and less likely to fail," the president said.

Mr. Obama's plan also includes a new and powerful agency to protect Americans who have credit card debt, home loans or other financial obligations.

The president wants Congress to approve the proposal by the end of the year. Treasury Secretary Timothy Geithner is expected to take questions from congressional committees on the White House proposal on Thursday.