* Both sides raise concerns about Federal Reserve's role

* A top House Democrat says plan needs to be tougher

* Republicans fear more bailouts

By Thomas Ferraro

WASHINGTON, June 17 (Reuters) - President Barack Obama's proposed financial regulatory overhaul could face big changes in Congress, where over the years members of both parties have permitted lax controls blamed for the U.S. economic meltdown.

Democratic and Republican lawmakers found fault with at least some of the ideas put forward in the president's proposal, which seeks to clamp down on the country's biggest financial firms in the hope of preventing another economic crisis. [ID:nN17330766]

The biggest sticking point may be the role of the Federal Reserve, the U.S. central bank. Obama envisions the Fed overseeing the largest financial firms to ensure that they are not taking excessive risks that could destabilize the economy.

But several top Democrats and Republicans questioned whether that would vest too much authority in an agency that has already drawn the ire of many lawmakers for its role in the costly bailouts of Bear Stearns and AIG.

"There's not a lot of confidence in the Fed at this point," Senator Christopher Dodd, chairman of the Senate Banking Committee, said on Wednesday.