Obama to merge bank agencies in reform plan: source

By Kevin Drawbaugh

WASHINGTON (Reuters) - The Obama administration plans to merge two banking regulators and create a federal watchdog on consumer financial products as part of a sweeping reform plan to be formally unveiled on Wednesday.

The U.S. Office of Thrift Supervision will merge with the Office of the Comptroller of the Currency, both bank overseers, a congressional aide said, citing a briefing given by Treasury Department officials.

The administration has been discussing for six months how best to tighten bank and market regulation in response to the worst global financial crisis in generations. An OTS-OCC merger had been seen as likely to be included in its plan.

President Barack Obama will formally unveil the proposals on Wednesday. Treasury officials were giving briefings in both the Senate and the House of Representatives on Tuesday evening.

Obama pledged earlier on Tuesday in remarks at the White House that he would pursue major changes in financial oversight, but warned it will be a "heavy lift" politically with special interests already offering opposition.

A key element in the plan will be creating an independent Consumer Financial Protection Agency to write and enforce rules on fair lending and other matters.

The administration wants to accomplish a wide range of changes in regulation to try to prevent a recurrence of the crisis that has been hammering economies around the world.

Goals include closing gaps in regulation without shackling firms so tightly that they cannot support economic growth; forcing banks to hold more capital so they can better survive tough times, and bringing more transparency and accountability to financial markets that in recent years expanded far beyond the government's ability to keep track of them.