Cover Story December 30, 2009, 5:00PM EST

Not So Radical Reform

(page 4 of 4)

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In September Obama scolded Wall Street for "reckless behavior" Larry Downing/Reuters

Wall Street is probably happy with the slowness of the process," says Paul Miller, an analyst with investment bank FBR (FBCM) Capital Markets, "because the slower the process, the more you can drag it out and water it down."

Meanwhile, the onslaught from the financial services industry continues. The U.S. Chamber of Commerce has focused on the Consumer Financial Protection Agency, a possible component of the bill that Dodd is trying to craft. The lobbying group launched a television advertising campaign titled "No Sleep" to illustrate the sleepless nights of business owners overwhelmed by regulation, and created a Web site to stoke opposition. The campaign follows a grassroots effort in August to block the formation of the agency; back then bankers visited lawmakers in 36 states and wrote more than 75,000 letters to Congress, according to David Hirschmann, head of the Center for Capital Markets Competitiveness, a Chamber-led initiative focused on financial regulation.

It's possible public anger could yet fuel a regulatory push. Banks will start giving bonuses to their employees in January; the bigger the payouts, the bigger the potential outrage. Senators John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) on Dec. 16 proposed a bill that would reinstate the 1933 Glass-Steagall Act, which separated commercial banking from investment banking until its partial repeal in 1999. "Wall Street firms have recovered nicely and profits are soaring," McCain said in a press conference, while "Main Street is suffering terribly." The same day Representative Maurice Hinchey (D-N.Y.) put forth similar legislation in the House. But even he thinks it's a long shot: "There's a lot of pressure coming from the big banks to prevent this kind of thing from happening."

A failure wouldn't surprise frustrated lawmakers disappointed by the turn in Washington. "My greatest fear for the last year has been an economic collapse," says Representative Brad Miller (D-N.C), who sits on Frank's House Financial Services Committee. "My second greatest fear was that the economy would stabilize and the financial industry would have the clout to defeat the fundamental reforms that our nation desperately needs. My greatest fear seems less likely...but my second greatest fear seems more likely every day."

With Gadi Dechter and Robert Schmidt in Washington and Michael J. Moore in New York

Vekshin is a reporter for Bloomberg News. Kopecki is a reporter for Bloomberg News in Washington.

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