President Barack Obama - kicking off a drive to rewrite the playbook guiding U.S. financial institutions, markets, and consumers - said his plan seeks a "careful balance" that doesn't stifle the power of the free market.

In remarks at the White House, Obama detailed the reform proposals the administration says are necessary to avoid another financial crisis. He confirmed that the overhaul, which he wants to complete this year, includes giving more power to the Federal Reserve to police large, systematically important institutions, allowing the government to break firms apart, implementing new rules for complex instruments and creating a new federal agency to oversee consumer products such as mortgages and credit cards.

"With the reforms we are proposing today, we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse," Obama said. "We seek to create a framework in which markets can function freely and fairly, without the fragility in which normal business cycles bring the risk of financial collapse; a system that works for businesses and consumers."

Obama, whose economic team has been crafting the overhaul for months, said inadequate regulations, coupled with a vast culture of greed and an explosion of complicated financial instruments, induced excessive risk taking and helped trigger the economic crisis. The remedy, he said, is a "sweeping overhaul of the financial regulatory system" on a scale that hasn't been seen since the Great Depression.

Obama said large financial companies will be held to higher standards, with more stringent capital and liquidity requirements to boost their resiliency. The Fed's new authority will be complemented by an oversight council of regulators to "tackle issues that don't fit neatly in an organizational chart."

To close gaps in regulation and keep banks from seeking the lightest-possible agency regulator, Obama confirmed that the Office of Thrift Supervision will be dismantled and said only one federal banking charter will be offered. He said derivative instruments such as credit default swaps will be subject to greater regulation and hedge-fund advisers will be forced to register with the Securities and Exchange Commission.

"We are called upon to put in place those reforms that allow our best qualities to flourish - while keeping those worst traits in check," Obama said. "We are called upon to recognize that the free market is the most powerful generative force for our prosperity - but it is not a free license to ignore the consequences of our actions."

But moving his plans through Congress as they are currently written is far from assured, given turf battles among lawmakers and what is sure to be heavy resistance from the financial sector. The Bush administration's attempt to rewrite the rules of financial regulation, which also would have heightened the Fed's supervisory powers, never got off the ground, despite a push last year by then-Treasury Secretary Henry Paulson.

And Obama acknowledged earlier this week that his revamp will be "a heavy lift." But two Democratic lawmakers pivotal to the effort predicted Wednesday that reform would be accomplished by year end.

"We'll have it done this year, before we leave," Senate Banking Committee Chairman Christopher Dodd, D-Conn., told reporters outside the White House.

House Financial Services Committee Chairman Barney Frank, D-Mass., said his panel would mark up "several" pieces of legislation in July, including bills on executive compensation, consumer financial product safety, and the regulation of derivatives. He said the package of legislation would come together in September.

Criticism of the plan intensified as details emerged late Tuesday and early Wednesday, with critics accusing Obama of an expensive overreach.

"We don't necessarily need more regulation," House Republican Whip Eric Cantor, R-Va., told the CBS Early Show. "And, in fact, I believe that we've had much too much emphasis on government lately and not as much emphasis on people."

Other members of the GOP echoed that sentiment.

"President Obama's plan is too predictable," said Republican National Committee Chairman Michael Steele. "Enough is enough."

Obama addressed critics who say his revamp goes too far, as well as those who complain it doesn't go far enough.

He said it would be a "mistake" to scrap the old system entirely, opting instead to "pinpoint the structural weaknesses" behind the current crisis. At the same time, he said "significant changes" are still needed.

"The absence of a working regulatory regime over many parts of the financial system - and over the system as a whole - led us to near catastrophe," he said. "We do not want to stifle innovation. But I'm convinced that, by setting out clear rules of the road and ensuring transparency and fair dealings, we will actually promote a more vibrant market."

Other reaction foreshadowed the long battle ahead.

The Financial Services Roundtable said it backs many of the White House's ideas, including creation of a systemic risk oversight authority, but opposes the new Consumer Financial Protection Agency.

The U.S. Chamber of Commerce said Obama's plan adds unnecessary layers of regulation without properly reforming the current system. "We can't simply insert new regulatory agencies and hope that we've covered our bases," said David Hirschmann, president and CEO of the Chamber's Center for Capital Markets.

House Minority Leader John Boehner, R-Ohio, said the new agency would be "very cumbersome."

"It will limit the number of new financial products that will come to the market and will give the federal government a strong presence in an industry that has been creative," Boehner said Wednesday.

The Consumers Union applauded the proposal to create an agency devoted to safeguarding consumers from shady financial practices.

"We have laws to make sure that cars are safe, toys are safe, and medicines are safe," said Gail Hillebrand, director of Consumers Union's campaign for financial services reform. "But when it comes to financial products like mortgages and credit cards, consumers don't have the protections we need."

-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256; henry.pulizzi@dowjones.com