President Barack Obama promised to protect the American Dream of education, home ownership and a secure retirement as he unveiled his shake-up of the country’s Depression-era financial regulatory regime.

Surrounded by regulators and lawmakers in Washington, the President vowed to restore to the US a system that rewarded "hard work and responsibility, not recklessness and greed, in which honest, vigorous competition ... is prized and those who game the system are thwarted".

"Millions of Americans who have worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and the failure of their government to provide adequate oversight," he said.

But months of debate lay ahead before the proposals are passed into law, with more than a dozen Congressional committee hearings scheduled in the next four weeks alone to examine to President’s plan.

The regulatory overhaul is expected to face opposition in Congress from Republicans angry over the increased power of the Federal Reserve. Meanwhile, powerful interest groups will likely use the slow progress through Congress to lobby for further dilution.

Timothy Geithner, the Treasury Secretary, will kick off discussions on Thursday when he testifies in front of the Senate banking committee and the House of Representatives financial services committee on the reforms.

Set out in an 88-page document, the President’s plans include anew regulator called the Consumer Financial Protection Agency to look after personal financial services, preventing a repeat of the irresponsible sales of sub-prime mortgages that led to last year's financial crisis.

A beefed-up Federal Reserve will oversee businesses considered 'too big to fail' because of the risk their collapse poses to the wider financial market. This includes companies such AIG, the lightly regulated insurer whose sales of complex credit default swaps helped spread the risk posed by sub-prime mortgages throughout the market.

A Financial Services Oversight Council made up of representatives from the various regulators will ensure that risks do not fall into the gaps between watchdogs. America's patchwork of financial regulators has been blamed for allowing the signs of an impending liquidity freeze to go unnoticed.

If a financial group does get to the brink of collapse, the Treasury will have the power to seize control of the company and undertake an orderly wind-down.

The Office of Thrift Supervision, which regulates small deposit-taking institutions, will close. All banks must wait until the end of the year for a Government working group to finalise proposals on increased regulatory capital requirements.

President Obama’s controls are a watered-down version of the radical reforms originally expected.

He backed away from a merger between the Securities and Exchange Commission and the Commodity Futures Trading Commission after encountering opposition from the Congressional groups that oversee the regulators.

The President's proposals are largely supported by Democrats but rival regulatory reforms have been laid out by a group of Republicans who oppose his plan to allow the Fed, albeit with permission from the Treasury, to continue to bail out financial groups without Congressional approval.

John Boehner, the Republican Congressman behind the rival proposals, yesterday criticised President's plans for continuing to "allow government bureaucrats to continue deciding behind closed doors who gets taxpayer funds".

Outside Congress, the US Chamber of Commerce has already voiced its opposition to key parts of the President’s proposals.

Aaron Marcu, head of litigation in the US at Freshfields, described President Obama's proposals as "thoughtful" but warned that the "devil will be in the detail" of the regulations as they are hammered out by lawmakers.

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