BulletProofBlog the blog on crisis communications

Late last week, the U.S. House of Representatives passed the most sweeping regulatory overhaul of the financial services industry in almost 80 years. Among the major elements of the bill are the establishment of a Consumer Financial Protection Agency (CFPA) and a Financial Services Oversight Council that are intended to protect consumers against abusive lending practices and monitor the overall health of the financial system. The bill also includes an expansion of the government’s power to intervene in troubled companies deemed too big to fail and wind them down.

Although House Speaker Nancy Pelosi called the vote “historic” and lauded efforts to “protect Main Street from the Worst of Wall Street,” the bill passed with no Republican support and over the objection of 27 House Democrats. House Minority Leader John Boehner called the legislation “exactly what the American people don’t want.”

While relatively slim passage in “The People’s House” does mark a significant milestone, there’s still a long way to go before the bill becomes law. The Senate’s painstakingly slow, contemplative approach will be on full display when it tackles the legislation next year. When the Senate does move a bill to conference, there’s a chance the process could be even further delayed because it might not look much like the House version at all.

The CFPA – the centerpiece of the House bill – was a major point of contention among moderate Congressional Democrats and promises to be equally controversial in the Senate. Senate Banking Committee Chairman Chris Dodd has circulated a regulatory reform discussion draft, which, aside from similar calls for a CFPA, varies significantly from the House version.

What does a Senate slowdown mean for the financial services industry? It points to gridlock in Washington and opportunity on Wall Street. While politicians look to score points with voters, banks and other non-banking institutions have time to implement their own consumer and investor protection reforms. In so doing, the financial industry could a) provide Congress with the necessary political cover, thus enabling a less aggressive regulatory approach to be considered appropriate, and b) provide itself with enhanced credibility and trust among consumers who are hungry for leadership, no matter who it comes from.

For the financial industry, the sooner companies move to enact their own plans, the better – lest they be forced to do so in a far more burdensome manner than they would prefer.

Don Hannaford is Senior Vice President and Chair of the Public Affairs Practice at Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.