Obama argues for strong financial watchdog agency

President Barack Obama speaks about the elections in Afghanistan from the White House in Washington August 21, 2009.

WASHINGTON (Reuters) - President Barack Obama defended on Saturday a consumer watchdog agency the financial industry wants to weaken or strip from legislation that would strengthen the regulation of Wall Street.

The Democratic-controlled House of Representatives on Friday approved the biggest changes in financial regulation since the Great Depression -- a much-needed victory for Obama, whose job approval rating has fallen below 50 percent.

He and his fellow Democrats want to impose steps that would avoid a repeat of the meltdown that put the U.S. economy on the brink of collapse a year ago, and he used his weekly radio and Internet address to argue for "common-sense reforms."

The bill would create an inter-agency council to police systemic risk in the economy, crack down on hedge funds and credit rating agencies, set up a financial consumer watchdog agency, and expose Federal Reserve monetary policy to unprecedented congressional scrutiny, among other reforms.

Republicans and lobbyists for banks and Wall Street firms, whose profits could be threatened, have fought for months to weaken and delay reforms, criticizing what they call an unneeded and costly intrusion on business.

The battle will continue for months in the Senate, which is expected to push for more modest legislation.

Obama said the new Consumer Financial Protection Agency that would be established would have the power "to put an end to misleading and dishonest practices of banks and institutions" regarding credit and debit cards or mortgage, auto and payday loans.

Critics of the new agency charge that it would create more government bureaucracy, stifle innovation and lead to less consumer choice -- claims Obama rejected.

"Americans don't choose to be victimized by mysterious fees, changing terms, and pages and pages of fine print. And while innovation should be encouraged, risky schemes that threaten our entire economy should not," he said.

Obama, who is under strong political pressure to create jobs and reduce the country's 10 percent jobless rate, said it appeared the economy was turning the corner.

"These are good signs for the future but little comfort to all of our neighbors who remain out of a job," he said.

(Editing by Paul Simao)