WASHINGTON - A new Democratic Senate bill to tame the financial markets would give the government new powers to break up firms that threaten the economy, force the industry to pay for its failures and create a consumer watchdog within the Federal Reserve.

Legislation unveiled Monday by Senate Banking Committee Chairman Christopher Dodd falls shy of the ambitious restructuring of federal financial regulations envisioned by President Barack Obama or contained in legislation already passed in the House.

But the bill, which includes provisions negotiated with Republicans, would still be the biggest overhaul of regulations since the New Deal. It comes 18 months after Wall Street's failures helped plunge the nation into a deep recession. In its sweep, the bill would touch all corners of the financial sector, from storefront payday lenders to the highest penthouse office suites on Wall Street.

"Americans are frustrated and angry, as we all know," Dodd said. "They've lost faith in our markets, and they wonder if anyone is looking out for them." In announcing his bill at a news conference, Dodd stood alone, a sign of the difficult task ahead of him in forging a bill that can pass the Senate. None of the 10 Republicans on his committee endorsed his plan. Several Democrats have voiced dismay at Dodd's decision to reject a plan for a freestanding consumer agency, an Obama regulatory centerpiece.

The bill also does not fully embrace Obama's most recent demand to reduce the size of the largest financial institutions and to ban commercial banks from conducting risky trades on their own accounts.

Obama called the bill "a strong foundation" but signaled that it fell short of his requirements. "I will take every opportunity to work with Chairman Dodd and his colleagues to strengthen the bill and will fight against efforts to weaken it," he said.

The bill envisions a leaner Federal Reserve that would gain new powers to regulate the size and the activities of the nation's largest financial firms. The Fed's independent consumer bureau would write regulations governing all lending transactions. Bank regulators, however, could appeal those regulations if they believe they would affect the health of the banking system.

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