US TREASURY SECRETARY Hank Paulson conceded yesterday that it could take "many years" to overhaul the US system of financial regulation as he outlined details of an ambitious plan to rework a framework that has been in place since the Great Depression.

The Bush administration issued its proposal amid growing criticism that the fragmented regulatory system contributed to the meltdown in the US subprime mortgage business and the resulting global market turmoil.

But the plan - which envisions giving the Federal Reserve broad powers to tackle systemic risk and reducing the role of some other regulators - would "require a great deal of discussion and many years to complete", Mr Paulson said.

He compared the plan to the "Green Book" of 1991, which ultimately resulted in the Gramm-Leach-Bliley Act eight years later. That law repealed the 1933 Glass-Steagall Act, which had separated commercial and investment banking.

Mr Paulson said the blueprint's far-ranging recommendations "should not and will not be implemented until after the present market difficulties are past". He added: "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."

Many of the proposals would require legislation. In a sign of the difficulties that the Bush administration could face in Congress, Chris Dodd, chairman of the Senate Banking Committee, called the Treasury plan a "wild pitch . . . not even close".

The Treasury has been working on the proposal since March 2007 in an effort to bolster US capital markets amid growing competition from overseas. Originally, the debate focused on the question of whether lighter-touch regulation could boost US competitiveness.

However, the global credit crisis exposed significant gaps in the ability of US regulators to supervise Wall Street and the mortgage business, triggering calls in Congress for a complete overhaul of financial regulation and tighter controls.

Although the idea of a revamp has been broadly welcomed, crucial constituencies expressed concerns about some of the Treasury's proposals, raising the prospect that Mr Paulson is facing a tough bureaucratic and political battle.

Wall Street executives were yesterday lukewarm about the plan, with many bankers arguing it could place regulatory shackles on some of investment banks' most lucrative strategies.

While most financial institutions decided not to comment publicly on the plan or issued anodyne statements welcoming the Treasury secretary's efforts, in private many bankers expressed concerns at its side-effects.

Chief among their concerns was whether a new regulatory structure overseen by the Federal Reserve would constrain investment banks' ability to leverage up their balance sheets - a move that could significantly reduce their profits.