By John Shaw

WASHINGTON (MNI) - Senate Banking Committee Chairman Chris Dodd Thursday officially launched his effort to overhaul the U.S.'s financial regulatory structure by saying that a new regime is needed to fill the "gaping holes" in the current structure.

"We have pulled back from the brink. But our examination found that the underlying problems in our financial sector leave us vulnerable to relapse. I will say as plainly as I can: I don't know that our economy can survive another shock," he said in his opening statement.

Focusing on the broad need for regulatory reform, Dodd did not offer a detailed explanation or defense of the plan he unveiled last week.

But he repeated his strong support for creating a financial consumer protection agency. "By creating a consumer agency, we will make sure credit becomes available again on a fair, affordable, understandable and transparent basis," he said.

Dodd also defended his plan to consolidate the regulatory power of the Federal Reserve, the FDIC, the Office of Thrift Supervision and the Comptroller of the Currency into a single entity called the Financial Institutions Regulatory Administration.

"Our plan will replace the myriad government agencies with a single, empowered, competent federal banking regulator," Dodd said.

"For firms that do play by the rules, this single prudential regulator will provide clarity, cut red tape, and make it easier to compete," he added.

Dodd also said his plan creates a separate entity, the Agency for Financial Stability, to create, monitor, and regulate large financial institutions whose failure could cause a risk to the broader economy,

Dodd said the U.S. needs a "comprehensive solution" to fix an antiquated financial regulatory regime.

"The security of our economy is at stake," he said, adding that the status quo is "simply unacceptable."

Sen. Richard Shelby, the ranking Republican on the panel, was sharply critical of Dodd's approach to regulatory reform and indicated that the effort to pass regulatory reform will be a tough and protracted battle.

He argued that the Banking panel should still be focused on fully understanding the financial crisis that has just occurred.

He said the Banking Committee should understand "every facet of the current crisis" before undertaking a major regulatory overhaul.

Shelby said he had hoped Dodd's bill might provide the basis for a bipartisan agreement, but doubts this will be the case.

"The bill requires a complete rewrite," Shelby said.

Shelby said he and Dodd do agree that the Federal Reserve should have a "limited range of responsibilities, focusing on monetary policy.

Shelby said he strongly opposes Dodd's proposal to create a single federal banking regulator, calling it an "revolutionary" approach that could hamper the stability of the current system.

Shelby also said that creating a consumer protection agency is a "fundamentally flawed concept" which creates "a massive new federal bureaucracy."

Shelby said that Senate Republicans will offer a comprehensive alternative to Dodd's bill.

"At this point I will be opposing the bill," he said

Dodd said his panel will hold a confirmation hearing for Federal Reserve Board Chairman Ben Bernanke on Dec. 3 or Dec. 4

** Market News International Washington Bureau: 202-371-2121 **