WASHINGTON — When Christopher J. Dodd announced in January that he would not seek a sixth term in the Senate, he called reform of financial regulation, along with health care, “the two most important issues of our time,” and pledged to spend his last year in Congress “fully focused” on his legislative duties.
But as Mr. Dodd, chairman of the Senate Banking Committee, prepares a proposal to overhaul financial regulation, to be released possibly as early as this week, he is finding that complete focus may not be enough.
Details of part of his plan became public in news reports on Friday. The most hotly disputed elements — the creation of a consumer protection agency to watch for deceptive and abusive terms on mortgages, credit cards, payday loans and other financial products — are a reminder of how intense lobbying and partisan gridlock threaten to significantly weaken what the Obama administration has called a top priority.
“The financial services lobby and particularly the big banks are driving the agenda right now,” Travis B. Plunkett, legislative director of the Consumer Federation of America, said. “They are the ones gaining ground. Their strategy is clear: death by a thousand cuts.”
As part of a regulatory overhaul adopted in December, the House voted to create a freestanding Consumer Financial Protection Agency. Since then, the financial services industry has been largely unified in trying to reduce the proposed agency’s independence, as well as the scope of its powers.
The lobbying effort has been so fierce that the Treasury secretary, Timothy F. Geithner, called a meeting on Thursday with representatives of the United States Chamber of Commerce, the American Bankers Association and six other groups, at which he warned that failure to pass a regulatory overhaul could destabilize the markets.
Mr. Dodd, a Connecticut Democrat, met on Saturday and Sunday with a banking committee member, Bob Corker, Republican of Tennessee, in hopes of coming up with a “consensus package” that would have at least some Republican support, Kirstin Brost, a spokeswoman for Mr. Dodd, said. He was not available to comment on his plan, she said.
While Mr. Dodd has indicated a willingness to give
ground on several aspects of the consumer proposal, those concessions have not been enough to gain the backing of Richard C. Shelby of Alabama, the senior Republican on the committee.
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