by Xinhua Writer Chen Gang NEW YORK, June 25 (Xinhua) -- U.S. President Barack Obama's regulatory reform is moving toward the right direction but not enough, Nobel economics laureate Joseph Stiglitz said on Thursday. 'One of the problems is that we have banks that are too big to fail, too big to be financially resolved,the economist told Xinhua in an interview. 'They're backed by the U.S. government because the deposits are not insured. It's an invitation to gamble for irresponsibility.' The Obama Administration released last week its proposal to make the most sweeping changes in banking regulation in 75 years. The proposal came after a year of shocks on Wall Street and a credit crunch that led to the worst recession in the U.S. in half a century. 'We've seen the consequences before. But in fact, in the way that we addressed the problems, we made the problems worse. The too- big-to-fail banks have become even bigger, even more difficult to resolve problems,' said Stiglitz. 'So the sad part was that there is no proposal to effectively deal with the too- big-to-fail banks. We need to break them up and we need to restrict the kind of lending activities, risk taking activities that the very large banks can undertake,' he added. Under the proposal, much of which will be subjected to approval by Congress, the government will make the Federal Reserve a systemic risk regulator to oversee large institutions whose failure could threaten the stability of the entire system. Hedge funds, derivatives and consumer mortgages, will be all under the supervision of the government. 'Many people think we need to do more regulation. It was excessively lack of regulation that led to the problem. The problem is the Federal Reserve did not do the job that was supposed to do. The Fed was in large measure, responsible for the problems that the country is in and the world is in,' said the economist. 'So isn't it a little strange to say, the Fed, you didn't do what you are supposed to do, and the solution to that is to give you more power not to do what you are supposed to do?' he asked. 'The difficulty or the worry is that there is always a worry, that the U.S. Treasury is too connected to the financial markets. And therefore the proposals they have, the worry is that they reflect the interests of the financial markets, not the interests of the American people,' said Stiglitz. 'Now there are wide spreads of discussions of alternative approaches, there were some good things. For example, the creation of a financial product safety commission, providing consumer protection, something that I've strongly supported,' he said. 'This is an example of trying to make sure that those are potentially hurt by bad bank practices have a voice in self- protection rather than the bank who have interests in making more money by weak regulation, running their own regulatory framework. And that's the fundamental difference. And expanding that kind of financial product safety commission I think is really the way to go,' added the economist. 