After a year of planning and in the midst of a financial crisis which is taking a heavy toll on the economy, the U.S. Treasury unveiled a far reaching overhaul for financial regulation meant to boost the nation's competitiveness.

The plan outlined on Monday in Washington by the top U.S. finance official, Treasury Secretary Henry Paulson, includes the merger of two major regulatory bodies and new powers for the Federal Reserve Bank, which would become the market stabilizer for the entire financial system.

While the major initiatives would take years to become a reality, Paulson suggested during a path to change through short and medium term steps which could be implemented as early as this year.

Discussions about the Blueprint presented today began last June, before the current credit and housing crisis hit its full stride in August. Paulson said the first priority is to get through the current market difficulties.

In the short term, the plan would facilitate communication between federal financial agencies and the President. It would also set minimum federal standards for the mortgage origination sector, a flashpoint of the current housing crisis.

Our first and most urgent priority is working through this capital market turmoil and housing downturn, and that will be our priority until this situation is resolved, Paulson said.

Intermediate action would establish regulation for payment systems across the country and merge the agencies which oversee the securities industry and futures trading.

The long term plan would establish three agencies to regulate U.S. Finances: the Fed would monitor the entire financial sector; another would ensure the health of federal banks; a third would protect consumers and investors.

Paulson said that much of the current regulatory system was developed after the Great Depression as a response to innovations or stresses in the market.

The bulk of these regulatory responses made sense at the time they were created, but as we look at today's financial markets, the lack of a comprehensive design is clear, he said.

He said the Treasury met extensively with U.S. and international financial regulators to begin the planning.

Discussions also included those in industry, academics, politics and other regulators.

According to Paulson they all seemed to declare that first, it was a difficult task and second, we must do this to retain our competitive advantage.