By Silla Brush - 08/04/09 08:18 AM EDT
The Treasury Department is circulating talking points to lawmakers headed home for the August recess as a way to round up support for President Barack Obama's plan to overhaul the financial system.
In an 18-page handout to members, the Treasury Department is pressing its case for an overhaul that includes setting up a new federal agency to oversee consumer products such as mortgages and credit cards. The department is also defending the $787 billion fiscal stimulus program.
"We are working closely with our colleagues in Congress because we both know it's critically important to act quickly to fix a system that is clearly broken," said Treasury Department spokesman Andrew Williams.
Democrats and Republicans expect to square off throughout the recess on the higher-profile issue of healthcare reform. But the administration is also working to gather support in August to pass new financial regulations by the end of the year.
House Financial Services Committee Chairman Barney Frank (D-Mass.) had wanted to pass legislation supporting the new agency through his committee before the recess. Amid a backlash from lobbying interests, Frank postponed debate until September.
The overhaul plan includes efforts to empower the Federal Reserve to oversee systemic risk, set up the new consumer agency, regulate financial derivatives and curb excessive corporate pay, among other measures.
Federal financial regulators such as the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve have cast doubt on several parts of the plan in testimony before Congress.
Meanwhile, groups for and against parts of the plan, particularly the consumer financial agency, are preparing campaigns to pressure lawmakers.
Labor unions, consumer watchdogs and other supporters of the Consumer Financial Protection Agency (CFPA) proposal have formed the Americans for Financial Reform coalition. The group has a $5 million budget to back the president's plan.
Financial industry and other business opponents have been meeting for weeks to plan opposition to the effort. Opponents of the agency plan say it would hurt financial innovation and increase costs.
The talking points also specifically defend the agency's impact on community banks. "In recent years, such banks have been forced to compete with non-bank financial institutions that are not subject to federal consumer protection regulation," the talking points read. The proposal would "level the playing field, making community banks more competitive."
Democrats are hoping to win support for the consumer agency from small community banks as well as credit unions.
— This story was updated at 8:59 a.m.