Pelosi backs financial protection agency over objections from some Blue Dogs

House Speaker Nancy Pelosi (D-Calif.) is backing the creation of a consumer protection agency ahead of the final round of committee debate on a bill to overhaul the regulation of the financial services industry.

But the Speaker’s endorsement could put her at even further odds with the conservative wing of the Democratic Caucus just as she is grappling with how to win enough of their votes to pass a major healthcare reform bill out of the House.

“Congress is working with President Obama to protect American taxpayers by ushering in an era of honesty, fairness, transparency, and accountability in our financial marketplace and preventing the abusive anti-consumer practices that resulted in the worst global financial crisis since the Great Depression,” Pelosi said in a statement. “We will help achieve this goal by establishing a consumer financial protection agency, whose sole purpose is to protect the financial interests of America’s families.”

Rep. Barney Frank (D-Mass.), the chairman of the Financial Services Committee, hopes to complete committee work on his financial regulatory reform bill as early as this week. House Majority Leader Steny Hoyer (D-Md.) said this past week that he could bring the bill to the floor as early as the week after.

Reform of the laws regulating the financial services industry and many of the products they trade privately and on behalf of consumers has been a top priority for Democrats, whose majorities in both the House and the Senate were bolstered after many voters linked last year’s stock market crash to Bush administration policies.

But, just as with healthcare, Democrats do not uniformly agree on the size and scope of new regulations.

Frank has been a leading proponent of a Consumer Financial Protection Agency (CFPA), originally called for by President Barack Obama, and has already scaled back the scope and reach of an initial CFPA proposal to allay the concerns of the New Democrat Coalition, a large group of centrist, business friendly Democrats.

But some conservative Blue Dog Democrats – the same block that for months has stymied Pelosi’s attempts to pass a healthcare bill with a public option – are backing an alternative version of the financial reform bill that lacks a consumer protection agency.

Blue Dog Rep. Walt Minnick (D-Idaho) prefers the creation of a consumer financial protection council that he believes would accomplish the goal of protecting consumers from predatory lenders and faulty, sham products, but without creating a new bureaucracy or single federal regulator.

Frank will likely be able to pass his bill out of committee over objections from any conservative Democrats, but that could just pit a much larger block of Democrats against the Speaker, who will need to coral the 218 votes necessary to pass the bill.

“Along with robust supervision of financial firms, and strong oversight of their practices, this agency will prevent the egregious abuses that hurt working families, the young and the elderly, and the millions of consumers who entrusted their hard-earned dollars to financial firms that deceived them,” Pelosi said, reaffirming her belief that the CFPA must be part of any financial regulatory reform bill that passes the House.

This story was updated on Oct. 14.