Even before the administration officially released its plan for regulatory reform today, the legislation wasn’t given much of a chance of passing this year. The thinking is that, with health care and climate change bills currently in markup, there just isn’t time to devote to financial regulation. The Senate will reportedly not even touch the topic until after August recess (though the House may move on it in July).

I get that there is a lot going on in Congress. Still, I worry that the delay not only kills any momentum for changing the system, but also gives the banking and financial services industries ample time to throw their money and influence around. Consider this reaction to the plan from the institutional brokerage firm Concept Capital (via Economix):

In our view, this plan is as negative for financial firms as the industry feared. Still, this is not the end of the game for financial firms. This proposal will change radically as it slowly moves through Congress. We expect a flood of negative headlines in the coming weeks and months, especially as we expect the House Financial Services Committee to begin voting on legislation in July. Yet the congressional agenda is packed and key Senate leaders are distracted. So we see little Senate movement in 2009. That gives the industry lots of time to try to modify the final bill.

As Ezra Klein put it, a delay provides a window “in which the broader public can lose interest in financial regulation and the financial industry can ramp up its lobbying effort in the Congress. It also puts us a lot closer to an election, which will make that lobbying effort all the more effective.” And here’s Concept Capital, admitting what a great opportunity the delay is!

Look at the example provided by the failure to pass cram-down legislation. There was pretty widespread agreement that something needed to be done to address the housing market, and a bill that would have allowed bankruptcy judges to cram-down mortgage payments for troubled homeowners eventually made its way through the House. Then it sat in the Senate, the banking and mortgage industries picked it apart, and it ultimately failed.

Peter Solomon, an investment banker and counselor to the U.S. Treasury in the Carter administration, said that the administration’s plan may already have been scaled back “because lawmakers and the public perceive the financial crisis has abated.” An administration official, meanwhile, told reporters that “the president wants to see a bill he can sign this year.” “We can’t afford to wait. We can’t afford to let our financial system continue to operate under a regulatory system that is inadequate,” the official said. I hope the administration can hand at least some of that sense of urgency over to Congress.

Today, the Obama administration is rolling out its plan for reforming financial regulation, and a key facet of the plan is the creation of a consumer protection agency (which will be officially named the Consumer Financial Protection Agency). The agency will be charged with overseeing how financial products like mortgages and credit cards are marketed to consumers.

Yesterday, the banking lobby voiced its displeasure with the idea of a new agency, and advocated simply relying on the same regulators that let the house burn down in the first place. And according to National Journal, the bankers have found an ally in the Chamber of Commerce:

Firing a warning shot ahead of the Obama administration’s proposal for overhauling the nation’s financial regulatory system, the U.S. Chamber of Commerce today warned it will vigorously oppose creation of a stand-alone consumer safety commission for financial products. Creating such a regulatory authority “is not a silver bullet for enhanced consumer protection,” said David Hirschmann, president of the Chamber’s Center for Capital Markets Competitiveness. “In fact, it may be a lead balloon.”

Last week, the Chamber rolled out a $100 million campaign to “defend and advance economic freedom.” The Chamber’s press office wouldn’t talk to me because it’s “not entertaining calls from bloggers at this time,” but I’d sure like to know if any of that $100 million is going towards lobbying against this new agency.

Anyway, if it’s designed correctly, a consumer protection agency could be a very good thing. Part of the leadup to this crisis was no one adequately policing mortgages on the ground level. Thus, lots of lousy loans were handed out and then sold to Wall Street, which securitized them and came back for more, fueling more bad lending.

As Matt Yglesias points out, it’s unclear how much of this was fraudulent lending, but in light of stories like that involving Wells Fargo — which is accused of intentionally steering minorities who qualified for prime loans into subprime — I’m sure the agency will have some things to look at. It’s also encouraging that the agency’s rules “wouldn’t pre-empt state laws, which mean states could push for tougher policies banning certain lending practices.”

That said, the agency will only be effective if it’s on par with the banking regulators and can keep up with financial innovation. It can’t be second tier, without enough resources or stature to do its job effectively. The administration’s plan calls for “stable, robust funding,” and giving the agency “sole rule making authority” in terms of consumer protection. We’ll see if Congress decides to grant those requests.