Washington  - President-elect Barack Obama vowed to restore confidence in the US financial system as he announced his choice to head the government's top regulator on Thursday.

Obama named Mary Schapiro, a long-time regulator, to lead the Securities and Exchange Commission, which has come under sharp criticism for failing to foresee the massive financial crisis striking US banks.

While Obama's first task when he enters office in January will be stabilizing the economy, Obama said Schapiro would help create a "21st century regulatory framework" to ensure that another financial collapse does not happen in the future.

"The regulators who were assigned to oversee Wall Street dropped the ball," Obama said at a Chicago press conference. Schapiro would help "crack down on a culture of greed" that had spread through the financial industry.

Risky investments in the US housing market were the key reason for the financial crisis that has cost banks more than 500 billion dollars in writedowns and has helped tip the US economy into recession.

Obama pledged to restore "openness, accountability and transparency" to the financial system. Schapiro said reforms were crucial if the SEC was to fulfil its primary role of protecting investors, many of whom have lost millions as US stocks plummeted over the year.

"Investor trust is the lifeblood of our financial markets," Schapiro said.

Schapiro currently leads the Financial Industry Regulatory Authority, an arm of the SEC that watches over securities.

She is to replace SEC chairman Christopher Cox, a Bush appointee whose term officially runs through 2009 but who has said he will step down at the end of Bush's term. (dpa)