June 10, 2009

The Obama administration is pulling back from some of its most ambitious ideas for overhauling the financial system, after determining that the consolidation of power under fewer federal agencies would face grave opposition by lawmakers and regulators, sources familiar with the discussions said.Although the unveiling of the plan is a week away, several central elements have already been pummeled in public by lawmakers, wary of the concentration of authority in few hands, and in private by some economists and financial executives consulted by senior officials.

The administration had originally sought to eliminate turf wars among agencies and gaps in their oversight, for instance by centralizing the power to oversee banks in one body and combining the two agencies that police financial markets.Those proposals have fallen by the wayside, the sources said. Instead the administration increasingly is focused on adding new layers of regulation on top of old.