House Dems fight over bill to decide financial overhaul

WASHINGTON (AP) — After banks and their House allies won limits in the reach of state consumer banking laws, Democratic leaders on Thursday prepared to fight off efforts within their party to further weaken a crisis-driven financial-overhaul bill.

Votes on key amendments loomed, including one that would eliminate the creation of an independent Consumer Finance Protection Agency. The agency is a central element of the Democrats’ legislation and of the Obama administration’s proposed regulatory changes.

The change was being offered by Rep. Walt Minnick, a conservative Democrat from Idaho, and seven other centrist Democrats. The U.S. Chamber of Commerce, which has been running national television ads against the creation of a consumer agency, said it would base its support for lawmakers in next year’s elections, in part, on how they voted on the amendment.

Creating a consumer agency is a top priority for consumer groups and for labor organizations such as the AFL-CIO.

Democratic leaders also were pushing changes that would add further restrictions on banks and financial institutions. One, vigorously opposed by banks, would let bankruptcy judges rewrite mortgages to lower homeowners’ monthly payments.

A coalition of banking organizations on Thursday sent lawmakers a letter urging them to vote against the amendment. The House previously passed bankruptcy- mortgage legislation, but it failed in the Senate.

Democratic leaders had to scramble 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.

Rep. Melissa Bean, D-Ill., succeeded in getting her consumer protection limits inserted into Frank’s version of the bill. Her provision would make it harder for states to enforce their own consumer protection rules on national banks. Under the compromise, states would not be able to pre-empt federal consumer laws if the state law “materially” interferes with the business of banks.

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.