Progress Illinois

Big banks have been doling out wads of cash and stepping up political pressure on Capitol Hill in an effort to kill a package of new consumer protections. But following the latest surge in profits, along with a series of decisions to hand out historic bonuses at a time when consumers are being saddled with exorbitant fees and arbitrary rate hikes, they are losing sympathy in Washington. Even Illinois' own Rep. Melissa Bean, who agreed to introduce an amendment that would weaken the proposed Consumer Financial Protection Agency (CFPA) as the lead negotiator for the "New Democrats," appears to be taking the side of the consumers advocates who've been giving her an earful lately. The Washington Post has the details:

Large banks are on the verge of losing a key legislative battle over the shape of financial reform, an unusual setback that reflects the continued political backlash over their role in creating the financial crisis [...]

The debate came to a head last week. Bean's group said it would propose an amendment to retain the current [preemption] law. Liberals warned that if the amendment drew enough Republican support to pass, they would oppose the broader legislation to create the new agency. House leaders and the White House pressured Bean and the moderates to fall in line.

Despite tremendous pressure from the banking industry, Bean ultimately agreed.

We put out a call to Bean's office and her spokesman said only that "it's unclear" what will transpire in the House Financial Service Committee tomorrow. However, The Hill reports that Bean plans to introduce her amendment then withdraw it with the understanding that the issue will be discussed if and when the measure makes it to the House floor. The Woodstock Institute's Tom Feltner tells us that the latest developments are a step in the right direction but the battle over consumer protection is far from over. From a statement:

We appreciate Congresswoman Bean’s commitment to meaningful consumer protections, and we believe that a CFPA that sets minimum, not maximum, standards is the best way to ensure that consumers and small businesses are treated fairly...

Preempting state consumer protections is lucrative business, and we expect the financial services industry to push for preemption whenever and wherever possible.

Sen. Dick Durbin agrees. "The banking industry hates [the CFPA] like the devil hates holy water," he told Bill Cameron during a WLS interview yesterday. Durbin says he's bracing for a bitter fight until the end. Listen (the entire interview is available here):

Internal mp3

The House Financial Services Committee has already made a series of concessions to the banking industry, the most recent being a decision last week to exempt 98 percent of the nation's banks from the stricter rules that would accompany the creation of the CFPA. These small establishments control about 20 percent of the assets held by commercial banks. The rest is managed by 150 large banks, institutions which the American Bankers Association are still fighting vigorously to insulate from any reforms.

Encouragingly, the pushback from consumer advocates appears to be making an impact. And next week the pressure will mount as demonstrators are planning "a showdown" with the financial services sector at the American Bankers Association's three-day annual convention here in Chicago (October 25-27). We'll be there.