THE US House of Representatives has approved the most sweeping regulatory overhaul of the financial sector since the Great Depression of the 1930s, securing a key goal for President Barack Obama.

MPs voted 223-202 to pass the 1300-page legislation, a package of measures that Mr Obama's Democratic allies crafted in response to the global financial meltdown.

The US Senate is expected to take up the plan in 2010. It faces stiff opposition from the financial industry and Republicans, not one of whom voted for it. They claim its weighty rules stifle innovation.

Democratic House Speaker Nancy Pelosi described the measure as a warning to Wall Street that "the party is over". She said: "Families will no longer be at the mercy of Wall Street in terms of their jobs, their homes, their pension security, the education of their children."

Representatives had faced votes on several amendments, defeating one that would have scrapped the creation of a Consumer Financial Protection Agency to oversee mortgages and credit cards.

The bill may help Democrats harness simmering voter anger ahead of the 2010 mid-term election.

But the No. 2 Republican in the House, Eric Cantor, said the legislation "frightens people and creates uncertainty in the American economy, preventing job growth".

The bill notably addresses the issue of companies that have been deemed "too big to fail". Such companies received hundreds of billions of dollars in US government "bailout" cash because their collapse would have dealt crippling blows to the economy.

The legislation gives regulators the power to dismantle such giants and lays out a systematic way to unwind them in the event of collapse that ensures shareholders and unsecured creditors, not taxpayers, bear the losses.

It also reinforces the powers of the Securities and Exchange Commission to detect irregularities that could provide an early warning of fraudulent investment schemes, like the fraud perpetrated by Wall Street swindler Bernie Madoff.

The measure also includes a first-of-its-kind plan to regulate the vast market in elusive financial products called derivatives.

It would give the Federal Reserve broader powers to oversee large at-risk companies, and the Government Accountability Office - the investigative arm of the US Congress - more oversight power over the Fed itself.