WASHINGTON, Jan. 22 (AFP) – President Barack Obama unveiled plans Thursday to limit the size and scope of US banks and finance firms in a new assault on the Wall Street excesses laid bare by the financial crisis.

''Never again will the American taxpayer be held hostage by a bank that is too big to fail,'' Obama vowed, flanked by former Federal Reserve chief Paul Volcker, who advised the president on the rules.

Share prices dropped sharply on Thursday after US President Barack Obama proposed new limits on top bank risk profiles, spurring safe-haven US Treasury purchases but undercutting gains for the US dollar. At the close, the Dow Jones industrial average fell 213.27 points, or 2.01 percent, at 10,389.88 while the Standard & Poor's 500 Index lost 21.56 points, or 1.89 percent, at 1,116.48. Both indexes had their worst one-day percentage loss in nearly three months. The Nasdaq Composite Index dropped 25.55 points, or 1.12 percent, at 2,265.70.

The plans to limit ''excessive'' risk taking and ''protect'' taxpayers are aimed at preventing banks or finance institutions from owning, investing in or sponsoring hedge fund or private equity funds.

They will effectively force finance firms to choose between proprietary activities, trading in stocks and sometimes risky financial instruments and commercial activities, like making loans and collecting deposits.

The initiative, which must be approved by Congress, includes a new proposal to limit the consolidation of the finance sector, placing broader limits on ''excessive growth of the market share of liabilities'' at the largest financial firms.

Obama blamed banks for sparking the worst economic crisis since the Great Depression with ''huge reckless risks in pursuit of quick profits and massive bonuses'' in a ''binge of irresponsibility.''

He vowed to enact the reforms in Congress, even if Wall Street deployed an army of lobbyists to kill them.

''If these folks want a fight, it's a fight I'm ready to have,'' he vowed defiantly.

The announcement was the latest attempt by the White House to harness popular fury at massive Wall Street bonuses and the financial crisis, which is adding up to an angry political mood in a crucial election year.

Separately, the Federal Reserve and other US regulators ordered banks Thursday to follow tougher rules on capital requirements and accounting standards starting in November.

''Banking organizations affected by the new accounting standards generally will be subject to higher risk-based regulatory capital requirements,'' said a joint statement by regulators.

The new accounting standards require banks to include a number of off-balance sheet items in their liabilities, which could raise capital requirements.