After dozens of congressional hearings in the wake of the U.S. financial system collapse, the U.S. House of Representatives has begun the debate on major legislation supported by President Barack Obama designed to overhaul the financial system and provide more security for and boost the confidence of investors through tighter regulation.

Called the Wall Street Reform and Consumer Protection Act of 2009, the measure is the outcome of months of painstaking negotiations over provisions aimed at averting a repeat of the crumbling of credit markets that helped plunge the U.S. into the worst recession since the Great Depression.

Spearheaded by House Financial Services Committee Chairman Barney Frank, it aims to protect consumers from abuses that contributed to the 2008 collapse, and impose tighter regulation on an industry that had become too comfortable with excesses and firms that grew too big to fail.

Major points include:  creation of a Consumer Financial Protection Agency to oversee tens of thousands of financial products and services offered to individuals; new regulation of derivates, often highly leveraged and speculative investment instruments; and powerful new authorities to dismantle companies whose collapse would pose great economic risk.

Leading up to House debate, opposition Republicans and Democrats have argued over the impact of the legislation. Virginia Republican Eric Cantor asserted it would have a suppressive effect on the economy. "This is a case where we are doing the wrong thing for the right reason.   This bill impacts negatively the job creators. We know this bill will increase interest rates 141 basis points which means the loss of additional million plus jobs in the next five years," he said.

Democratic House Majority Leader Steny Hoyer recalled the $700 billion Troubled Asset Relief Program (TARP) a reluctant Congress approved amid paralyzed markets in 2008 to avert a potential depression, and the recession President Barack Obama inherited from the Bush administration.

While he said regulatory neglect was not unique to Republican administrations, Hoyer placed most of the blame on Bush administration policies that he said placed average Americans in the frustrating and demoralizing position of having to bail out Wall Street.

"Bailing out people who were extraordinarily fiscally irresponsible.  Those same people that we want to regulate to make sure they are not subject to the regulatory neglect that they were subject to for 8 years when the [Bush] administration's policy was to simply get out of the way, not to regulate, not to oversee, and we saw extraordinary financial meltdown," he said.

A major proposal in the legislation involves creation of a $150 billion fund to be supported by companies with more than $50 billion in assets, to deal with future collapses.  Regulators would gain broad new powers to deal with companies whose size or practices are deemed to pose a risk to the economy.

Lawmakers, including conservative Democrats who might be swayed to vote against the bill, were also the focus of intense lobbying by banking and financial services industry opponents of the bill, including the American Bankers Association.

Republicans also merged their criticism of the financial overhaul bill with arguments against President Obama's decision to use money left from the $700 billion TARP to create jobs.

Texas Repubican Representative Jeb Hensarling responded this way when asked if any Republicans are likely to support the overhaul measure. "I would be surprised if any Republican voted for more bailouts, fewer jobs and less personal freedom."

After a bipartisan meeting with President Obama on Wednesday, Republicans said they stressed their concerns about the impact of more regulation on the economy, and about the president's job creation proposals.

Senate Democratic leader Harry Reid said President Obama showed patience in trying to demonstrate progress made so far under his administration, and said the president delivered this message to House Republicans. "One of the things he told my Republican friends there [was] stop trying to frighten the American people," he said.

House Republican leader John Boehner responded this way. "The president wants to blame us for informing the American people about what is happening here and how it will affect them.  But it's not what we are doing, it's the policies that they [the president and Democrats] are promoting here in Washington," he said.

House approval of financial overhaul legislation, which could come this week, would be a victory for Democrats and the president, whose Treasury Secretary Tim Geithner also played a major role in drafting the measure.
In the Senate, where lawmakers remain consumed by the intense debate on health care reform, Democrats and Republicans still have differences over financial reforms, and consideration there before the end of the year is not assured.