President loses momentum in financial overhaul effort

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 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 Banker's Association.

Consumer advocates say they remain optimistic 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.

Lawmakers heard loud complaints during their August recess from community bankers about these two consumer-oriented proposals. At the same time, the U.S. Chamber of Commerce waged a $2 million advertising campaign against the consumer agency idea.

Treasury Secretary Timothy Geithner is expected to tell the House Financial Services Committee today that the nation was moving toward economic recovery but that the regulatory system was broken and must be fixed. "We may disagree over details of how to best fix those flaws, but that cannot mean we do not act," he said in prepared testimony obtained late Tuesday.

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