House debate over a vast rewrite of Wall Street regulations kicks off in a charged partisan atmosphere, with plenty of pressure from big bank and business lobbies determined to change it.
At the same time, moderate and liberal Democrats are displaying their muscle, winning concessions before a single House vote and laying the groundwork for some contentious votes as lawmakers work their way through 30 or more amendments to the regulatory overhaul. A final vote is tentatively set for Friday.
Democratic leaders scrambled Wednesday after party centrists rebelled and threatened to delay the bill if the House was not allowed to vote on their proposed amendments.
At issue were changes they sought to ease regulatory provisions on consumer protections and complex derivatives trades. The impasse broke, but only after top Democrats spent more than an hour with high-level Treasury Department officials in Speaker Nancy Pelosi's offices crafting a compromise.
And last week, members of the Congressional Black Caucus signaled they would withdraw support for the bill if minority communities hard hit by the recession didn't get economic assistance. The bill now contains $3 billion they sought to help unemployed homeowners avoid foreclosure and $1 billion for neighborhood assistance.
The broader legislation hits big banks hardest, a response to public anger at the notion that some institutions had grown too big to fail and pushed the nation's financial system to the brink of collapse.
It would create a Financial Services Oversight Council to monitor the financial system and watch for future threats. Large, interconnected firms would have to put more money into their reserves. They would have to feed a $150 billion fund to cover the costs of dismantling a failing competitor. And even if healthy, they could be forced to downsize if they are deemed a grave threat to the economy.
If the bill's villains are the largest banks, it casts consumers as victims and provides for a new federal agency with regulatory and enforcement powers to oversee the public's dealings with lenders.
The bill would remove consumer regulations from current banking regulators and place them in a new Consumer Finance Protection Agency with powers to oversee the public's dealings with lenders. Derivatives, complicated financial instruments, would be traded in more regulated exchanges and hedge funds would have to be registered.
The House debate comes more than a year after the downfall of Wall Street banking house Lehman Brothers Holdings Inc. panicked the financial markets and forced an unprecedented intervention by the federal government. The Senate is expected to consider a bill next year.
The House legislation encompasses several recommendations by the Obama administration, which this week signaled its support.
Backing for the bill splits along party lines, with the rhetoric clearly aimed at next year's elections. Republicans cast the legislation as a continuation of unpopular financial industry bailouts, while Democrats portray the GOP as reflexively opposed to any controls on Wall Street.
House Republican leaders met with financial industry lobbyists Tuesday in the Capitol for a rally against the bill. The U.S. Chamber of Commerce launched a television ad campaign against the consumer agency proposal.
But the financial sector lobby is split. Large banks such as J.P. Morgan Chase & Co. and Bank of America Corp. and industry associations such as the Financial Services Roundtable have been lobbying vigorously against Frank's bill. At the same time, the Independent Community Bankers of America, which represents about 8,000 smaller banks across the country, support the current version.
The community bankers, however, would probably drop their support if the House adopts an amendment by liberal Democrats to let bankruptcy judges rewrite mortgages to lower homeowners' monthly payments.
Read the bill, H.R.4173, at http://thomas.loc.gov/