Obama says would move fast to update Wall St rules

PUEBLO, Colo. (Reuters) - U.S. Democratic presidential candidate Barack Obama said on Monday a broad overhaul of Wall Street regulations was essential to repairing shattered confidence in financial markets and he would move quickly on a plan if he wins the White House.

In an interview with Reuters, Obama said the Federal Reserve and U.S. Treasury have been forced to grapple with the worst financial crisis since the Great Depression by "making it up as they go along."

There was no precedent for the kinds of troubles shaking up the financial world and policymakers lacked the tools to deal with them, he said.

"Each problem ends up requiring a patchwork solution," Obama said on his campaign plane as he traveled in Colorado.

Concerning short-term steps that might be needed to soothe frazzled markets, the Illinois senator said more action might be needed to help stabilize the housing market, which has been at the center of the crisis.

"If the housing market continues to decline even after investors and lenders have absorbed significant losses and we've seen so many foreclosures, then we may have to take some additional steps. But it's premature to get into exactly what those steps would be," he said.

Obama said he was concerned that a "vicious circle" could develop in the markets, where the big losses at investment houses led to a severe credit squeeze on Main Street, preventing businesses from hiring and investing.

That, in turn, could further undermine financial markets, he said.

Both Obama and John McCain, his Republican rival in the November 4 election, have called for a modernizing of financial market rules. Obama has long urged such a revamping and outlined a plan in March.

"I think we have to move on it very quickly because my suspicion is the deteriorating confidence in the credit markets, in the financial markets, is not going to immediately bounce back," he said.

Obama's proposals include bolstering regulators' authority, streamlining an overlapping system of regulatory agencies and improving market transparency.

"I tried not to prescribe in excruciating detail how to structure (the regulations)," Obama said. But he added that ideas like finding ways to better monitor complex new financial instruments go to "the essence of what's happening now."

(Reporting by Caren Bohan; Editing by Patricia Wilson and Philip Barbara)