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December 16, 2009 > Democrats halt effort to kill US consumer agency

Democrats halt effort to kill US consumer agency

By Jim Kuhnhenn, Associated Press Writer

WASHINGTON (AP), Dec 11 - House Democrats headed into the final stretch on a long-awaited Wall Street regulation bill Friday after fending off an effort to kill a proposed U.S. consumer agency that is a central feature of the legislation.

The sweeping regulatory overhaul aims to address the myriad conditions that led to last year's financial crisis.

Test votes during two days of debate indicate that Democratic support for the underlying legislation will hold in final passage.

Before the final vote Friday, House members rejected by a vote 223-208 an amendment that would have killed a proposed Consumer Financial Protection Agency. The agency would consolidate consumer lending regulations and enforcement that is now split among several banking regulators.

A bipartisan coalition had proposed keeping the consumer powers within each regulator and creating an oversight council. The U.S. Chamber of Commerce lobbied heavily to kill the agency and ran national television ads against it. Consumer groups said it was essential to the overall regulatory package.

In a separate vote Friday, Democratic leaders failed to revive legislation that would let bankruptcy judges rewrite mortgages to lower homeowners' monthly payments. The measure was rejected by a 241-188.

The House previously passed bankruptcy-mortgage legislation, but it failed in the Senate.

Democrats hoped that by inserting the provision in the regulatory legislation they would have had another opportunity to make it law. Aiding homeowners through bankruptcy had been a key feature of President Barack Obama's foreclosure fighting proposal, but the president did not push for it.

Banks and credit unions have lobbied against the bankruptcy measure. They say it would force a flood of bankruptcy filings and ultimately drive up mortgage rates.

Late Thursday, scores of Democrats voted with Republicans on amendments that eroded the reach of proposed regulations on complex derivatives trades.

Democratic attempts to toughen the legislation failed.

Though not major setbacks, the votes illustrated the difficulties facing House Financial Services Chairman Barney Frank and the Obama administration as they seek to pass the most ambitious rewrite of financial regulations since the New Deal of the 1930s.

The Chamber has been an aggressive opponent of the legislation, running television ads against the proposed consumer agency and pressuring lawmakers to vote to eliminate it and to ease the derivatives regulations.

The legislation still imposes restrictions on derivatives, aiming to prevent manipulation and bring transparency to a $600 trillion global market. An amendment by New York Democrat Scott Murphy, adopted 304-124 Thursday night, exempted businesses that trade in derivatives, not as financial speculators, but to hedge against market fluctuations such as currency rates or gasoline prices. The amendment also provided an exception for businesses that are considered too small to be a risk to the financial system.

A Democratic effort to make more companies subject to derivatives regulation failed 279-150.

For Democrats, the votes split along turf lines. All but a few of the Democrats on the House Agriculture Committee voted for the broader exception. The Agriculture Committee oversees commodities trading and had recommended less restrictive derivatives rules, but the final bill did not include them.

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