Fault Lines Emerge as Financial Players Try to Influence Regulatory Overhaul
Tuesday, June 9, 2009
As the Obama administration prepares to unveil plans for overhauling financial regulation, potentially addressing such diverse issues as credit card lending and global economic threats, a multifront war is brewing. It pits competing interests among businesses, consumers, government agencies and lawmakers against one another.
The outcome of this battle is likely to shape how much profit banks will make, who can get a mortgage, which federal regulators oversee different corners of the economy -- and, ideally, whether the government is prepared for future financial threats.
With so much money and power on the line, interests inside the government and out are not waiting for the administration to reveal its plan, which sources say will be detailed next week. Lobbyists for financial firms and consumer activists, among others, have been meeting privately with the Treasury Department and the White House to press their views, according to people briefed on the discussions.
These early efforts are exposing the fault lines that will define the debate over the future of financial regulation. Yet the coalitions are fluid, with allies on one issue often at odds about others.
-- Financial firms, for instance, have closed ranks in vigorously opposing a proposal for how mortgage lending, credit cards and mutual funds will be regulated.
-- Big banks are squaring off against smaller ones over proposals for consolidating regulatory powers in a few agencies.
-- Banks and hedge funds find themselves on opposite sides in the debate over how to regulate the trading of derivatives, an exotic financial instrument that aggravated the financial crisis.
-- And government agencies, jealous of one another's existing powers and prestige, are also clashing over plans to redistribute their authority.