Washington » In the most sweeping overhaul of financial regulations since the Depression, a new Democratic Senate bill would give the government powers to break up firms that threaten the economy, force the industry to pay for its failures and create an independent consumer watchdog within the Federal Reserve.

Legislation unveiled Monday by Senate Banking Committee Chairman Chris Dodd falls shy of the ambitious restructuring of federal rules envisioned by President Barack Obama or contained in legislation already passed in the House.

But the 1,336-page bill, which includes provisions negotiated with Republicans, would still be the biggest overhaul of regulations since the New Deal. It comes 18 months after Wall Street's failures and the collapse of Lehman Brothers helped plunge the nation into a deep recession.

In its sweep, the bill would touch all corners of the financial sector, from small-town mortgage brokers to the highest penthouse office suites on Wall Street. Lobbyists were already mobilizing to change several of its features.

"Americans are frustrated and angry, as we all know," Dodd, D-Conn., said. "They've lost faith in our markets, and they wonder if anyone is looking out for them."

In announcing his bill at a news conference, Dodd stood alone, a sign of the difficult task ahead of him in forging a bill that can pass the Senate. None of the 10 Republicans on his committee endorsed his plan. Several Democrats have voiced dismay at Dodd's decision to reject a plan for a freestanding consumer agency, an Obama regulatory centerpiece.

The bill would create a powerful nine-member Financial Stability Oversight Council, chaired by the treasury secretary, to look out for the system-wide health of the financial sector and to stop financial firms from becoming "too big to fail." The council could place large, interconnected financial institutions under the supervision of the Federal Reserve. And it would have the authority to approve the breakup of large complex companies if they pose a threat to the nation's financial system.

Dodd partially embraced Obama's call for a so-called Volcker Rule.

Named after former Fed Chairman Paul Volcker, the proposal would limit the size of some of the largest financial institutions and ban commercial banks from conducting certain trades on their own accounts. Dodd's bill sets a goal for ending risky trading and hedge-fund investments by depository banks but calls for a study before any regulations are written and enforced.

Like the House bill, Dodd's proposal would create a mechanism to shut down large, failing firms, with shareholders and unsecured creditors bearing the losses. Management also would be removed. The costs of such a shutdown would be covered by a $50 billion fund financed by the largest financial firms.

The Federal Reserve, under Dodd's plan, emerges as a leaner institution with new powers to regulate the size and the activities of the nation's largest financial firms. The Fed, once threatened with the loss of all its regulatory powers, would oversee all bank holding companies with assets of $50 billion or more. But it would also be given power to regulate and even break up large interconnected companies, such as the insurance conglomerate American International Group, whose failure could pose a risk to the economy.

The bill creates restrictions for previously unregulated exotic products and financial instruments. It requires hedge funds that manage more than $100 million to register with the Securities and Exchange Commission. And it gives shareholders the right to cast a nonbinding vote on executive compensation packages.

Dodd's consumer proposal is perhaps the most contentious piece of his package. The financial industry is fiercely opposed because it separates consumer regulations from the functions of other financial regulators.

But Dodd would give the oversight council the power to veto regulations written by the consumer bureau. Consumer advocates objected to that provision, but their criticism was tempered because they had expected worse.