Reaction from politicians, industry and investors

NEW YORK (Reuters) - The Obama administration on Wednesday said it was proposing the biggest overhaul of the financial regulatory system since the Great Depression but would maintain a careful balance between free markets and regulation.

The following is reaction from politicians, industry representatives, industry analysts and investors:

PETER MORICI, OF THE SMITH SCHOOL OF BUSINESS AT THE UNIVERSITY OF MARYLAND

"I have gone through the President's financial sector regulatory reform package. It is a huge bureaucratic overreach that will prove ineffective and too costly.

"For example, the new systemic risk regulator is an interagency committee, which already informally exists, and the Fed. We all knew about the SIVs and what they were doing before the crisis but no one saw a problem. It was not the lack of an agency or committee but foresight that caused us to let them go too far.

"Similarly, most of what the consumer protection agency would accomplish is already in the works. The last thing the banks need is another dimension of regulation. We do need for the agencies like the Fed and FTC to do their jobs better and that is already happening. Credit card contracts and mortgage writing are being reformed.

"The morass being proposed is an example of blind faith in government regulation, much as those who want few strings have blind faith in market discipline. The trick is to get regulation right, not mound it like whip cream on a banana split."

KEITH SPRINGER, PRESIDENT OF CAPITAL FINANCIAL ADVISORY SERVICES IN SACRAMENTO, CALIFORNIA

"More regulation is only going to cut off free market enterprise. Regulation typically doesn't help the economy, especially when you come out of a downturn.

"You have to have protections, but more regulation doesn't help anybody when you come out of these situations because you want free market capitalism to flourish, you want new ideas to come about.

"When you come out of these types of situations, people are leery anyway and they're going to be watching out for it. So you don't really need regulation, but (Obama) has to look tough for the public."

TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET MANAGEMENT IN NEW YORK

"I do think this issue is somewhat weighing on the market. The devil is in the detail, we will see what happens. Regulations like this will not be without controversy and it might take some time for some type of bill to pass. From those that have spent some time looking at it there are some real concerns that is would restrain lending, perhaps cause interest rates to rise, and of course curb margins at banks.

We really need to see all the details and everybody needs to remember that this is just a proposal and is something for Congress to start working work off of and is not a final bill. Clearly increased regulation has been something that investors have known was going to occur."

RICHARD BAKER, PRESIDENT AND CHIEF EXECUTIVE OF MANAGED FUNDS ASSOCIATION, THE HEDGE FUND INDUSTRY'S MAIN LOBBYING GROUP

The proposals, "specifically those relating to the regulation of hedge funds and other privately managed pools of capital, represent an intelligent approach to tackling financial regulatory reform."

"The proposals would, for the first time, subject all investment advisers and managers to oversight, examination and inspection by a strengthened SEC and require them to provide periodic, detailed reports to their regulators and to the public, including their investors and financial counterparties, describing who they are and what they do."

"These proposals would also require investment advisers and managers to provide, on a confidential basis, federal financial regulators with important information regarding their size, leverage and interconnectivity to help regulators better assess the extent to which, if at all, such entities may pose a systemic risk."

PAUL MILLER, VETERAN CONGRESSIONAL LOBBYIST, WASHINGTON DC

"All business sectors are looking at this administration and saying, 'Are we next?'. We have to be careful about proposing new rules."

"The devil are in the details. Regulations may be needed, but let's make sure that they are the right regulations."

"Miller said small businesses, who he primarily represents, may not be equipped or have the resources to deal with new regulations. "We have to be careful not to burden them with new regulations."

On prospects for passage: "There is so much on the table. Health care will dominate the discussion for the next several months. Who knows. I'm not going to make any guesses. I would have been wrong on a lot of guesses this year."

ETHAN SIEGAL OF THE WASHINGTON EXCHANGE, A PRIVATE FIRM THAT TRACKS CONGRESS AND LEGISLATION FOR INSTITUTIONAL INVESTORS

"I think that the Obama Administration has put on the table a politically smart, pragmatic and reasonable package, especially given the territorial politics of Capitol Hill."

"I'm very skeptical that they can get any significant reform through the Congress this year; instead in the near-term I think that oversight and regulatory changes will be implemented as best as possible at the agency and regulatory level by the Obama Administration and the regulators themselves. As for 2010, it will still be an uphill climb with the Congress, but too early to predict."

"Almost every financial services sector you can name will want to slow it down and throw roadblocks in the way," Siegal said, predicting an industry lobbying blitz as well as opposition from congressional committee chairs who oppose giving up oversight of federal agencies proposed to be phased out or consolidated."

TIMOTHY RYAN, CEO OF THE SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCATION

"With their proposals today, the Administration has moved this critical debate from broad discussion to specific action -- this is an important step forward. We have a once-in-a-generation opportunity to rebuild our regulatory structure so that our financial system is more stable, more resilient and better underpins a dynamic US economy."

REPUBLICAN SENATOR BOB CORKER, A MEMBER OF THE SENATE BANKING COMMITTEE

"Per the administration's proposal, the Fed was a clear winner in this. I think that we need to have a pretty vigorous debate about whether it's best to employ our central banker, the lender of last resort, with additional responsibilities or whether we'd be better off looking at a council.

I think we'll actually have a pretty major debate around that issue. Certainly I like the fact that the FDIC was given the resolution authority. And I know that means they'll deal with the plumbing of the issues, I think I want to understand more fully how that process begins, who gives that direction.

I did notice where the Treasury -- again we've scanned this, it's 88 pages, it came last night -- I did notice where Treasury had to say grace over the Fed on its 13-3 activity, exigent circumstances. I want to make sure that what we're not doing is sort of creating a partnership if you will between Treasury and the Fed and that the Fed will continue to act in a very independent way."

(Reporting by Juan Lagorio, Joseph A. Giannone, Ed Krudy and Leah Schnurr in New York and Rachelle Younglai, Tom Ferraro and Jeremy Pelofksy in Washington)