Obama's financial reforms grind forward under fire

By Kevin Drawbaugh

WASHINGTON (Reuters) - Two key components of the Obama administration's bold plan to reshape U.S. financial regulation came under attack on Wednesday, with lawmakers and lobbyists engaged in a reform debate of immense scope.

An informal panel of market experts issued a report in New York calling into question a core piece of the administration's plan -- putting the Federal Reserve in charge of monitoring big-picture, or systemic, financial risk in the economy.

The Fed is too "tarnished" and distracted by other duties to handle such a job, said the Investors' Working Group of big money management firms and two ex-chairmen of the Securities and Exchange Commission, William Donaldson and Arthur Levitt.

The report came amid growing skepticism on Capitol Hill about assigning the Fed systemic risk regulator duties, although the administration remains committed to the approach.

At the same time, the top financial reform architect in the U.S. House of Representatives defied the administration over its proposal to eliminate the federal thrift charter, the legal statute underlying the U.S. savings and loan industry.

Democratic Representative Barney Frank, chairman of the House Financial Services Committee, said the thrift charter should be altered, but not scrapped entirely.

Frank's stance on the thrift problem will greatly influence its solution.

Months of discussion and deal-making over such issues lie ahead for the Obama administration's plan, with changes to its original proposals seen as certain, alongside efforts to reconcile it with a parallel reform effort under way in the European Union.