The agency would be a key element in a sweeping administration plan to overhaul financial regulation, which officials hope to unveil in the next few weeks, including the creation of a new authority to police risks to the financial system, and a new agency to protect consumers, the sources said. Most of the proposals would require legislation.
"The president is committed to signing a regulatory reform package by the end of the year, and officials at the White House and the Treasury Department are continuing work with Congress on the final phases of a proposal, but there is no final proposal in place and any announcement will not be for a couple of weeks," said White House deputy spokesman Jennifer R. Psaki.
Senior officials have reached agreement on some aspects of the plan, according to a person familiar with the discussions.
They favor vesting the Federal Reserve with new powers as a systemic risk regulator, with broad responsibility for detecting threats to the financial system. The powers would include oversight of previously unregulated markets, such as trading in derivatives, and of market participants such as hedge funds.
Officials also favor the creation of a new agency to enforce laws protecting consumers of financial products such as mortgages and credit cards.
And they want to merge the Securities and Exchange Commission and the Commodity Futures Trading Commission, which share responsibility for protecting investors from fraud.
Other aspects of the plan remain under discussion, sources said, speaking on condition of anonymity because they were not authorized to disclose details.
Among these ideas is the creation of a single agency to regulate banks. The new regulator would assume the responsibility for the safety and soundness of banks, currently divided among the Fed and three other agencies: the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp.
Under the current system, banks can choose their regulator. Because the agencies are funded by fees from the banks, the regulators have an incentive to compete for business by offering more lenient oversight. The current system also divides supervision of the largest financial conglomerates among multiple agencies, each with responsibility for certain subsidiaries, creating gaps in coverage that companies have been able to exploit. Many experts believe these failures of regulation contributed to the financial crisis.
Officials also are considering giving the FDIC the power to seize large financial firms, such as the parent companies of banks, to prevent their collapse. Treasury Secretary Timothy F. Geithner and Fed Chairman Ben Bernanke both have testified that the financial crisis could have been mitigated if the government had been able to exercise such authority. For instance, this could have averted the chaos that followed the bankruptcy of investment bank Lehman Brothers, senior officials have said.
Some aspects of the plan could face significant opposition on Capitol Hill and among other regulators.