WASHINGTON — President Barack Obama’s attempt to tighten the government’s reins on Wall Street is losing momentum as banks gain traction against his proposal for increased consumer protections and key lawmakers question his call for standardized financial products.
That the financial industry could successfully push back against such a plan would have been unthinkable a year ago, when the markets teetered on the brink of collapse. But as anger over Wall Street greed and arrogance has begun to ebb, the industry is finding the breathing room it needs to make its case.
“The sense is that people are taking a more deliberative approach, and I think that is very beneficial,” said Wayne Abernathy, executive vice president of the American Bankers Association.
Consumer advocates say they remain optimistic that congressional Democrats ultimately will champion increased protections for average Americans. But they acknowledge that they are frustrated with the dialogue on Capitol Hill.
“I hear some members of Congress mouthing the words of financial lobbyists,” said Travis Plunkett, legislative director for the Consumer Federation of America. “They seem to forget these are the same institutions that brought the economy to its knees a year ago.”
Two key pieces of Obama’s plan have emerged in recent weeks as particularly vulnerable: the creation of a Consumer Financial Protection Agency to police the fine print on credit cards and mortgages, and a requirement that banks offer customers “plain vanilla” — low- risk, standardized — products such as 30-year fixed-rate mortgages.
Other changes being contemplated in the House and in the Senate:
• Some Democrats in key committees, including Sen. Mark Warner of Virginia and Rep. Walt Minnick of Idaho, have joined Republicans in questioning the merits of a new consumer agency.
• A significant number of Democrats and Republicans oppose giving the Federal Reserve authority to supervise all companies — not just banks and bank-holding companies — whose failure could cascade through the financial system.
• Senate Banking Committee Chairman Christopher Dodd, D-Conn., is moving toward the creation of a single banking regulator.
