Defining financial regulatory overhaul remains a PR battle as Senate vote nears

For the U.S. Chamber of Commerce, the proposed financial regulations headed to the Senate floor would create sleepless nights and a lack of credit for the nation's small-business owners.

For the Obama administration and its allies, those same new rules would protect members of the U.S. military and other ordinary Americans from predatory lending practices.

Which side is right?

It depends on whom you ask, but this much is certain: Millions of dollars and countless hours of strategizing have gone into a public relations battle to win the hearts and minds of Americans as lawmakers begin to finalize the details of the largest financial regulatory overhaul since the 1930s. That war over public perception -- fought with TV and radio ads, media events, speeches and private conversations -- is escalating as the topic heats up this week.

Numerous Wall Street firms are preparing to hold annual shareholder meetings and announce their earnings for the first quarter of 2010. Union leaders and other consumer advocates are planning demonstrations across the country this month, culminating with a massive march on Wall Street. A Senate subcommittee begins a series of hearings this week investigating the causes behind the financial crisis. That comes on the heels of hearings conducted by the independent Financial Crisis Inquiry Commission.

The financial regulatory legislation inching its way through Congress is complex and voluminous -- the Senate bill stands at more than 1,300 pages and includes measures that would revamp the regulatory landscape, create oversight of the vast derivatives market and give the government authority to wind down large, troubled firms. Although each element of the massive bill represents fundamental changes to the relationship between Wall Street and Washington -- attracting scores of lobbyists trying to shape the outcome -- much of the content remains obscure and highly technical.

As a result, both sides have sought to boil down the arcane legislation to a simple question of how it would affect the lives and pocketbooks of everyday Americans. The most visible and politically charged clash has centered on consumer protection.

President Obama has pushed for the creation of a powerful, stand-alone Consumer Financial Protection Agency meant to protect ordinary consumers of mortgages, credit cards and other such loans against unfair and predatory lending practices. The House approved the new consumer regulator when it passed a far-reaching bill in December. The most recent Senate version, put forth by the chairman of the banking committee, Christopher J. Dodd (D-Conn.), would create an independent consumer protection bureau within the Federal Reserve.

Opponents of the new agency have insisted that it would burden businesses with unnecessary new regulations, increase costs, stifle financial innovation and curtail choices for consumers.

"Our whole goal has been to show that the American people don't agree that creating new regulators is the answer," said David Hirschmann, chief executive of the Chamber of Commerce's Center for Capital Markets Competitiveness. "They are deeply skeptical of creating new regulators."

Chamber officials say they have spent more than $3 million and generated hundreds of thousands of citizen letters to Congress to fight the new agency. They have created a Web site -- http://www.stopthecfpa.com -- and used Facebook and Twitter to spread their message.

One new television spot, titled "No Sleep," shows a small-business owner restless in bed at 2:48 a.m., worried about payrolls and bills. "Now Washington wants to make it worse with the CFPA," the narrator intones, "a massive new Fed agency that will create more layers of regulation and bureaucracy. . . . Small businesses work too hard to suffer further."

The Democratic National Committee struck back this week with its own commercial, set to run on cable channels nationwide, that says "Wall Street's risk and greed cost us trillions" and burdened the "working families and small businesses" that bailed them out.

"Tell Congress we can't afford another financial crisis," the ad implores. "Pass President Obama's plan to hold Wall Street accountable . . . now."

The Obama administration also has sought to discredit the Chamber in speeches and in conversations with lawmakers, calling its efforts "fake grass-roots stuff" that is "fairly transparent to everyone around Washington," according to one senior official who spoke on the condition of anonymity because the conversations were private.

A few weeks ago, Treasury Department officials held a news conference with members of the U.S. military to highlight how lenders often take advantage of soldiers and their families. The effort successfully sparked television and newspaper coverage.

This week, the administration will launch a series of speeches and newspaper op-eds to draw attention to the financial regulatory overhaul and its impact on the economy. In addition, administration officials have been reaching out to personal finance writers across the country to drive home the message of how regulatory reform could benefit ordinary Americans. The faster Congress passes a final bill, Obama economic adviser Diana Farrell said this week, "the faster we can get money channeled to small businesses."

Despite the public and private policy disputes, lawmakers from both parties have said that consensus exists on significant parts of the legislation and that a bipartisan bill lies within reach. Aides say Dodd hopes to usher his bill to the Senate floor later this month.