The U.S. government is proposing a sweeping overhaul of the way the nation's financial industry is regulated.

In an effort to deal with the problems highlighted by the current severe credit crisis, the new plan would give major new powers to the Federal Reserve, according to a 22-page executive summary of the proposal obtained Friday by the Associated Press.

The proposal would designate the Fed as the primary regulator of market stability, greatly expanding the central bank's ability to examine not just commercial banks but all segments of the financial services industry.

The administration proposal, which is to be formally unveiled in a speech Monday by Treasury Secretary Henry Paulson, also proposes consolidating the current scheme of bank regulation.

The plan would shut down the Office of Thrift Supervision, which supervises thrift institutions (savings and loan associations), and transfer its functions to the Office of the Comptroller of the Currency, which regulates banks.

The plan would eliminate the distinction between banks and thrift institutions.

The role the Federal Reserve has been playing in efforts to stabilize the financial system after a credit crisis hit last August would be formalized.

The Fed would become the government's "market stability regulator," given sweeping powers to gather information on a wide range of institutions so that Fed Chairman Ben Bernanke and his colleagues could better detect where threats to the system might be hiding.

The proposal is certain to generate intense scrutiny in Congress and within the financial services industry, where past efforts to change how regulation is handled have met with fierce resistance.

'He is on the money'

Sen. Charles Schumer, a Democrat from New York, said that he approved of much that Paulson had included in the administration proposal.

"In broad outlines, we agree with large parts of Secretary Paulson's plan," Schumer, chairman of the Joint Economic Committee, said in a statement.

"He is on the money when he calls for a more unified regulatory structure, although we would prefer a single regulator to the three he proposes."

Under Paulson's approach, the Fed would serve as the market stability regulator and there would also be a financial regulator that would focus on financial institutions that operate with government guarantees such as deposit insurance for banks.

The administration plan also proposes a business conduct regulator who would be in charge of overseeing consumer protection issues.

The plan was first reported by the New York Times on its website Friday night.