But they face uphill battle as lawmakers voice strong support
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(WASHINGTON) Banks and mortgage lenders are placing top priority on killing President Barack Obama's proposal to create a new consumer protection agency that would regulate home loans, credit card fees, payday loans and other forms of consumer finance.
The Obama administration fired an opening shot on Tuesday, sending Congress a detailed, 150-page proposal for an agency that would set new standards for ordinary mortgages, restrict or prohibit risky loans, investigate financial institutions and enforce new laws aimed at protecting credit card customers.
Administration officials said the plan addressed deep failures at existing bank regulatory agencies, which failed to rein in reckless mortgage lending and thus served as enablers of the financial crisis that began two years ago and remained under way today.
'This agency will have only one mission - to protect consumers,' said Treasury Timothy Geithner in a statement on Tuesday.
'Consumer protection will have an independent seat at the table in our financial regulatory system.' Administration officials did not say how the proposed Consumer Financial Protection Agency would be financed, or how much it would cost to operate.
But industry executives vowed on Tuesday to fight Mr Obama's plan with everything they have, even though banks are still heavily dependent on many taxpayer-supported loans and loan guarantees to get through the crisis.
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'It's going to be a huge fight,' said Edward L Yingling, president of the American Bankers Association. 'This is written so incredibly broadly that it affects anyone who has anything to do with consumers. This agency would have broad powers that go beyond every consumer law that has ever been enacted.'
The industry's heated reaction presages an intense lobbying battle that is already beginning. Opponents include both giant institutions like JPMorgan Chase and Wells Fargo as well as thousands of regional and local banks that have close ties to lawmakers in every part of the country.
But the opposition could also include countless mortgage lenders and independent mortgage brokers, as well as non-bank lenders like cheque-cashing services and payday lenders.
House and Senate Democrats, as well as many consumer groups, strongly support the proposal. The House Financial Services Committee hopes to complete work on a bill by the end of July, and House Democrats hope to send the measure to the Senate in September.
'I'm very much in favour of it,' said Representative Barney Frank, Democrat-Massachusetts, the chairman of the House Financial Services Committee. 'Anyone who thinks we're not going to create this agency is mistaken. The American public wants it.'
Bank executives said they knew they faced a difficult political fight, given the soaring number of homeowners facing foreclosure and the vast amounts of taxpayer money that have been used to bail out financial institutions.
The proposal would strip away all the consumer responsibilities that are currently assigned to existing bank regulators, from the Federal Reserve, the Federal Deposit Insurance Corp and the Comptroller of the Currency.
It would give the new agency marching orders to set standards for traditional mortgages, and the agency would have the authority to demand that lenders offer those kinds of loans or give consumers the chance to opt out of riskier products.
It would also give the new agency the power to restrict or prohibit mortgages that come with hidden fees and steep penalties for borrowers who pay the loan off early. -- NYT
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