- The Washington Times - Friday, December 11, 2009

House Democratic leaders struggling to advance a bill to overhaul the nation’s financial regulatory system have been hit by an unusual push back from a sweeping range of party interests determined to have their say.

The intraparty squabbles, coupled with strong opposition from big banks and Republicans, have threatened to derail one of the Obama administration’s top domestic priorities.

A final House vote on the bill, which would offer the most sweeping rewrite of banking regulations since the 1930s, is expected Friday.

But in recent days, Democratic leaders have scrambled to make peace with moderates, liberals, conservatives and pro-business Democrats within their ranks who have threatened to delay or block the bill if their amendments aren’t given a full House vote.

Votes on key amendments were expected late Thursday or Friday, including one by Rep. Walt Minnick, a conservative Idaho Democrat, that is being supported by several centrist Democrats. It would nix a proposed independent Consumer Financial Protection Agency and replace it with a council of existing regulators.

The agency, which is strongly supported by the administration, is designed to protect the public against abuses such as unscrupulous mortgage deals and excessive credit card rates.

“I think we’re going to beat the Minnick amendment, but it’s a real test,” said House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat.

Other sticking points included amendments that some Democrats sought to ease regulation on derivatives trades and a provision that would eliminate states’ ability to enforce tougher consumer laws.

A potential party mutiny was averted late Wednesday when top Democrats huddled with Treasury Department officials on Capitol Hill to craft a compromise that allowed the bill to move forward.

The House Congressional Black Caucus also showed its muscle last week when it suggested that it would withdraw support for the bill unless it contained economic assistance to help minority communities hard hit by the recession. Democratic leaders then included $3 billion in the measure to help unemployed homeowners avoid foreclosure and $1 billion for neighborhood assistance.

Another key provision of the bill would give the Federal Reserve the authority to step in and “wind down” failing nonbank financial firms deemed so large that their demise could bring down the economy.

The measure calls for a Financial Services Oversight Council to monitor the financial system. The agency would identify and regulate financial firms that are so large and interconnected that their collapse would put the entire financial system at risk, a scenario that prompted Congress last fall to approve the publicly unpopular $700 billion Troubled Asset Relief Program, or TARP.

Meanwhile on Thursday, Treasury Secretary Timothy F. Geithner was on Capitol Hill defending TARP and his decision this week to extend the program - which had been scheduled to expire at the end of the month - until October 2010.

“It would be irresponsible to do otherwise,” said Mr. Geithner while testifying before the Congressional Oversight Panel on TARP.

But House Republicans, who are unified in their opposition against the bill, said it would lead to increased government meddling in the private sector and more taxpayer-funded bank bailouts.

Republicans and financial institutions argue that tighter controls and more regulations would stifle investment and innovation in the financial world, threaten small businesses and possibly slow down the flow of capital through the markets, a scenario blamed for last year’s Wall Street meltdown.

“Economic freedom means the freedom to succeed and the freedom to fail,” said Rep. Mike Pence of Indiana, chairman of the House Republican Conference.

Democrats have accused Republicans of defending the interests of big banks, saying that Republicans and the administration of President George W. Bush for years looked the other way as the industry exploited loopholes and engaged in risky business practices.

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