The Obama administration on Thursday detailed its wide-ranging plan to overhaul financial regulation by subjecting hedge funds and traders of exotic financial instruments, now among the biggest and most freewheeling players on Wall Street, to potentially strict new government supervision.

The Treasury secretary, Timothy F. Geithner, outlined the plan Thursday before the House Financial Services Committee. He said the changes were needed to fix a badly flawed system that was exposed by the current financial crisis. Mr. Geithner, in his opening statement, called for “comprehensive reform. Not modest repairs at the margin, but new rules of the game.”

Included in the plan would be the establishment of one single agency “with responsibility for systemic stability over the major institutions and critical payment and settlement systems and activities.”

To that end, Mr. Geithner said: “Financial products and institutions should be regulated for the economic function they provide and the risks they present, not the legal form they take,” Mr. Geithner said. “We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.”

He did not provide details for how all this will work, saying that the proposals would be outlined over the coming weeks.

The plan, which would require Congressional approval, would give the government new powers over “systemically important” banks and other financial institutions that are so big that their collapse would jeopardize the economy as a whole.

The government would have the power to peer into the inner workings of companies that currently escape most federal supervision — insurance companies like the American International Group, multibillion-dollar hedge funds like the Citadel Group and private equity firms like the Carlyle Group or Kohlberg, Kravis & Roberts.

If regulators decided that a company had become “too big to fail,” as was the case with A.I.G. in September, they would subject it to much stricter capital requirements than smaller rivals and much closer scrutiny of its borrowing levels and its trading partners, or counterparties.

The 2003 campaign used eight, 60-square-foot (5.6-sq. meter) panels depicting images of factory farms next to Jewish concentration camp inmates and the slogan "Holocaust on your plate."

The Federal Constitutional Court in Karlsruhe on Thursday ruled that the ad campaign was not protected under freedom of speech laws.

PETA — People for the Ethical Treatment of Animals — claimed its goal was to compare Nazi-run concentration camps with contemporary animal abuse.

Paul Spiegel, former president of the Central Council of Jews in Germany, filed the suit against the ad campaign along with several other Jewish organizations.

Less than a week after pushing through legislation to impose a 90 percent tax on the bonuses, the House Financial Services Committee prepared a considerably milder proposal that would let Treasury Secretary Timothy Geithner and financial regulators decide if employee compensation was "unreasonable" or "excessive."

The panel was expected to endorse the measure on Thursday, paving the way for a floor vote as early as next week.

The proposal, sponsored by Democratic Reps. Alan Grayson of Florida and James Himes of Connecticut, would not force employees of insurance giant AIG to give back money already paid to them. But it would empower the government to stop future payouts by financial institutions even if employees have been promised the money.

The bill would exempt firms willing to participate in a government-sponsored program aimed at buying up $1 trillion of bad debt, or "toxic assets," sitting on the books of major banks.

Republicans opposed the bill because they said it was too vague.

"Private investors need certainty that Washington will not change the rules of the game while the game is being played," said Rep. Spencer Bachus of Alabama, the committee's top Republican.

But Democrats said it was necessary to protect taxpayer dollars. They pointed to a provision that would require Geithner to set standards to measure an employee's performance and the stability of a financial institution before bonuses are paid.

The 9th U.S. Circuit Court of Appeals on Wednesday rejected an appeal from the administration, saying U.S. District Judge Thelton Henderson can proceed with the hearings.

The Schwarzenegger administration is refusing to turn over $250 million as a down payment sought by a court-appointed receiver. The receiver, J. Clark Kelso, wants up to $8 billion spent on new medical centers for prison inmates.

The appeals court decided the case on procedural grounds. It did not weigh in on the larger question of how far the federal government can intrude on states' control of their prisons.

Investors reignited the market's two-week rally, cheering the government's plan to help banks remove bad assets from their books. They're also pleased with a report showing a surprising increase in existing home sales last month.

The Dow has ended the day up 497 points at 7,775 after rising more than 500 just before the closing bell. That was its biggest point gain in more than four months.

The Standard & Poor's 500 index is up 54 at 822 and the Nasdaq composite is up 98 at 1,555.

More than 2,800 stocks rose on the New York Stock Exchange, while just 262 fell. Volume came to a very heavy 1.91 billion shares.

WolfBlock LLP has more than 300 lawyers. The firm announced Monday that the partners have voted to shut down, but not immediately. They plan to keep operating for several months so the transition will be orderly for clients and employees.

WolfBlock says its core practice is real estate law and the recession has hurt that greatly. The credit crisis is another factor it the decision to close.

In addition to its Philadelphia headquarters, WolfBlock has offices in Boston; Cherry Hill, N.J.; Harrisburg, Pa.; New York; Norristown, Pa.; Roseland, N.J., and Wilmington, Del.