Barack Obama, the Democratic presidential candidate, has for the first time outlined his plans to overhaul Wall Street regulation if he wins the election for the White House in November.

Such regulation, Mr Obama claims, would be designed to prevent a rerun of the credit crisis that broke last summer.

Austan Goolsbee, senior economic adviser to Senator Obama, accused Wall Street of operating within a regulatory environment as lax as the Wild West. In a six-point reform plan, Professor Goolsbee said that banks should be forced to increase the proportion of capital they held compared with the amount they lent to clients.

Professor Goolsbee, of the University of Chicago Graduate School of Business, also said that Mr Obama supported a streamlining of the US financial regulatory system, which has a number of various agencies overseeing investment banks, insurers, brokers and mortgage lenders.

Yesterday Professor Goolsbee referred to accusations by Alan Schwartz, former chief executive of Bear Stearns, the investment bank that had to be rescued, that deliberately false and negative rumours circulated on Wall Street had led to his bank's troubles. He recommended that regulators seek to crack down on instances of market manipulation.

However, many of the measures proposed by Mr Obama have already been suggested by Henry Paulson, the US Treasury Secretary, who has sought to devise regulatory reforms in the wake of the problems at Bear Stearns this year. Mr Paulson has urged banks to increase their capital reserves and has already gone some way to simplifying America's regulatory framework by closing some oversight agencies.

More broadly, Mr Obama's move to suggest reforms for Wall Street is also seen as a way of consolidating his economic credentials before the November elections.

Michael Barone, of the American Enterprise Institute, the Washington think-tank, told The Times: “Obama has made no mention of scrapping Sarbanes-Oxley, I notice - the legislation that has done great things for the City of London but not so great for the City of New York.”

However, Mr Barone raised doubts about the sagacity of increasing regulation of the US banking system. He said: “It is already heavily regulated but it was the banks that sustained the biggest losses from the credit crisis.”

Professor Goolsbee is known for his support of free markets and defence of sub-prime lending on the grounds that it made home ownership more available to minority groups.

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