June 17 (Bloomberg) -- The regulatory overhaul proposed by the White House today is “far reaching” and will prevent future financial crises, said Lawrence Summers, director of the White House’s National Economic Council.

“Every important problem that was a contributor to past crises, and every important problem that we believe is potentially going to shape future crises, has been addressed,” Summers said today in an interview with Bloomberg Television.

President Barack Obama’s chief economic adviser defended the administration’s plan to modernize and strengthen regulation of the financial industry against criticism that the new rules don’t go far enough.

“This is a far-reaching set of proposals,” Summers said.

Proposed changes include an additional layer of regulation for the biggest financial firms, creation of an agency to monitor consumer financial products, charging the Federal Reserve with overseeing companies deemed too big to fail, and bringing hedge and private equity funds under federal scrutiny.

The administration didn’t “start completely from scratch” because “that would have delayed passage,” and “would have carried with it a great deal of risk,” Summers said.

He also said that giving the Fed more authority to oversee large, systemically important institutions is wise. Several lawmakers have balked at the idea, saying the central bank failed to detect and prevent many of the practices that led to the current crisis.

Fed’s Jurisdiction

“This problem was much more caused by what happened when institutions escaped the Fed’s jurisdiction than it was by anything the Fed did,” Summers said.

“Those institutions that someone thinks are sufficiently large or sufficiently interconnected, that their failure could do real damage to the system, are going to be watched with special care,” he said.

Summers said the White House plan seeks to curb some of the Fed’s emergency lending power by subjecting it to Treasury approval because “that type of lending is ultimately putting taxpayers at risk.”

Summers said the economy has improved this year.

“The economy is in a very different place than it was three months ago,” he said. “There’s been a lot of normalization.”

To contact the reporters on this story: Matthew Benjamin in Washington at Mbenjamin2@bloomberg.netMichael McKee in New York at mmckee@bloomberg.net.

Last Updated: June 17, 2009 14:00 EDT