WRAPUP 5-Obama promises to bolster financial regulation

* Schapiro, Gensler to lead regulatory reform

* Tarullo to get Federal Reserve Board seat

* Transportation, trade, labor officials expected Friday

By Caren Bohan

CHICAGO, Dec 18 (Reuters) - U.S. President-elect Barack Obama promised on Thursday to strengthen financial regulatory agencies and crack down on runaway "greed and scheming" in an effort to restore stability to a reeling U.S economic system.

Obama named veteran regulator Mary Schapiro as chairwoman of the Securities and Exchange Commission and Gary Gensler to head the Commodity Futures Trading Commission. The president-elect said he would charge them with leading a broad overhaul of the financial regulatory system.

"These individuals will help put in place new, common-sense rules of the road that will protect investors, consumers and our entire economy from fraud and manipulation by an irresponsible few," Obama told reporters in Chicago.

"These rules will reward the industriousness and entrepreneurial spirit that's always been the engine of our prosperity, and crack down on the culture of greed and scheming that has led us to this day of reckoning," he said.

Obama also named Georgetown University law professor Daniel Tarullo to fill one of the seven seats on the Federal Reserve Board, which is battling to ease a credit crisis and fend off a deepening recession.

The SEC, created after the 1929 stock market crash to police markets and restore investor confidence, has come under heavy criticism after the Wall Street meltdown and financial scandals exposed lapses in its oversight.

The collapses of investment firms Bear Stearns and Lehman Brothers prompted scathing criticism from lawmakers who said the agency, charged with monitoring publicly traded firms, should have flagged the problems earlier.

Criticism has intensified with the $50 billion investment fraud -- one of the biggest in history -- allegedly carried out over many years by Bernard Madoff.

"We have been asleep at the switch. Not just some of the regulatory agencies, but some of the congressional committees that might have been taking a look at this stuff," Obama said.

Obama, who takes office on Jan. 20, said regulatory reform would be one of his earliest initiatives and he would release a detailed plan for regulatory changes. He said there was a need to potentially consolidate some regulatory agencies.

Under one scenario backed by some lawmakers, the SEC would be merged with the CFTC, which oversees the markets for instruments such as futures contracts and options on oil, coffee, sugar and other commodities.

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