Obama defends the Fed

WASHINGTON (CNNMoney.com) -- President Obama offered a passionate defense of the Federal Reserve on Tuesday, explaining his proposal to put the central bank in charge of monitoring broad risks facing the financial system.

Obama, speaking at a midday press conference, defended the performance of Fed Chairman Ben Bernanke after the financial crisis.

Bernanke has done a "fine job" and "performed well," the president said.

In addition, Obama answered criticism, some of it resonating from members of his own party in the Senate, that giving the Fed authority to monitor systemic risk would endow it with too much power.

"If you look at what we've proposed, we are not so much expanding the Fed's power as we are focusing what the Fed needs to do, to prevent the kinds of crises that are happening," Obama said.

Obama last week presented an 88-page list of proposals to revamp parts of the system that regulate financial firms and products.

On Tuesday, Obama said that one of the reform proposals actually removes one Fed power: enforcing consumer protection. He wants to create a new agency to enforce consumer protection of financial products like mortgages and credit cards.

However, under Obama's plan, the Fed would be charged with making sure giant banks and insurance companies have enough capital to back up the big financial bets they're making.

Republicans and some key Democrats, such as Banking Committee Chairman Sen. Chris Dodd, D-Conn., are still perturbed that the Fed didn't do enough to monitor risk among the banks it already had under its watch.

0:00/5:01The Fed's heavier hand

Obama on Tuesday acknowledged the criticism. He said even the Fed would be the "first to acknowledge in dealing with systemic risk and anticipating systemic risk, they didn't do everything that needed to be done."

But Obama said he believed the Fed did better than most other regulators before the crisis started.

"I would say that all financial regulators didn't do everything that needed to be done to prevent the crisis that happened," he said. "That's why we put forward the boldest set of reforms in financial regulations in 75 years -- because there were too many gaps."

But the president went further in explaining why he wants Bernanke to be the one in charge of systemic risk. He said he believes the Fed has "the most technical expertise and the best track record in terms of doing that."

Obama's regulatory reform proposal still needs Congressional approval. This Thursday, the House Financial Services begins meeting regularly to work on regulatory legislation. The White House hopes to have a regulatory reform bill passed by the end of the year.