WASHINGTON (CNNMoney.com) -- The fate of a consumer financial protection agency was thrown in doubt Friday, as the Senate Banking Committee chief said he planned to push a bill forward without Republican support.
Sen. Christopher Dodd, D-Conn., said on Friday that banking committee staff will draw up draft legislation on all regulatory reform to be voted on later this month -- even though, "for now, we have reached an impasse" with the ranking Republican on that committee, Sen. Richard Shelby, R-Ala.
The sticking point is the consumer financial protection agency, which has long been considered the signature piece of the legislation offered by the Obama administration for redoing the regulatory system after the financial collapse.
Shelby said he supports consumer financial protection, but he's concerned about the financial health of companies. He wants the regulator who protects consumers to also consider financial firms' health, to strengthen "both consumer protection and safety and soundness regulation."
"I will not support a bill that enhances one at the expense of the other, however," Shelby said.
Big business and banking industry groups have targeted the consumer agency in particular, making it a priority to defeat. Financial service companies spent at least $439 million on lobbying in 2009, according to the Center for Responsive Politics. The U.S. Chamber of Commerce spent $74 million, although they also lobbied on health care issues.
As envisioned by the White House, the consumer financial protection agency would be a stand-alone department that would create and enforce consumer protection rules on products such as mortgages and credit cards.
Specifically, both the White House and Dodd want an independent consumer protection regulator with strong powers to regulate these products, given that existing regulators have been faulted for falling down on the job of protecting consumers during the financial crisis.
Bipartisan support sought: Last December, the House passed, along party-lines, what's considered a strong, stand-alone consumer financial protection agency -- even though certain financial products, such as auto loans, got exempted.
But the consumer financial protection agency always had a tougher path in the Senate. Democrats need Republicans to pass regulatory reform in the Senate, especially since Democrats lost their filibuster-blocking majority.
"I don't want to go to the floor of the United States Senate begging for a 60th vote," Dodd told the Obama administration during a Tuesday hearing. "I'm not going to do that."
Since November, Democrats and Republicans have been working together on key parts of regulatory reform. They've come to agreements in other areas, like a winding down process for giant financial firms now considered too big to fail, according to comments made by senators made during a Thursday hearing.
To win bipartisan support on the consumer protection part, Dodd had signaled weeks ago that he'd be willing to give up on the idea of a stand-alone consumer agency and consider placing a consumer regulator in an existing regulatory agency.
But Dodd would only agree to such a concession if such a consumer regulator could act independently, and get strong and separate powers to make and enforce rules on a range of financial products, such as auto loans, Congressional aides and lobbyists told CNNMoney.
The impasse is over how much independence and power a proposed consumer financial protection regulator would have, aides and lobbyists say.
"When you have a body that identifies abusive practices, it needs its own set of teeth to go out and say stop," said Reid Cramer, director of asset building at the New American Foundation, a left-leaning think tank.
What's unclear is how the impasse over consumer financial protection will impact the rest of the regulatory reform agenda in the Senate.
Sen. Bob Corker, R-Tenn., for one, said in a statement that he intended to continue working with Democrats through the weekend on the measures that would prevent banks from getting too big to fail.
"While I'm disappointed that Chairman Dodd and Ranking Member Shelby have reached an impasse, it won't alter my efforts toward a bipartisan bill," Corker said.
Republicans on the committee may feel obliged to oppose a final regulatory reform bill, despite months of bipartisan negotiations, if they deem that the consumer financial protection powers could threaten banks' safety and soundness.
"We don't think it's a good idea to separate regulation for the bank itself from the product it sells," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, a banking group.
On Friday, concerns about the consumer financial protection agency ricocheted across Capitol Hill. Rep. Niki Tsongas, D-Mass., sent e-mails to lawmakers asking them to sign a letter urging Dodd to "support a strong, independent Consumer Financial Protection Agency."
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