New law to regulate Wall Street and banks

Before approving the measure, House Democrats held off an attempt led by Representative Walt Minnick, Democrat of Idaho, to replace the proposed new consumer protection agency with a council made up of existing regulators.

He and other moderate Democrats, joined by Republicans and much of the banking industry, argued the new agency — a central element of the overhaul — represented an unnecessary bureaucratic approach that would give the federal government excessive control over mortgages, credit cards and other financial products.

“How many new government agencies are necessary to accomplish this task?” asked Representative Dan Boren, Democrat of Oklahoma.

Their effort was defeated on a vote of 223 to 208, removing a final obstacle to the measure.

In other important preliminary votes, lawmakers slightly scaled back the bill’s ambitions to address objections from powerful financial interests.

Heeding complaints from banks, the House rejected an effort to allow bankruptcy judges to restructure mortgage payments, a plan that has passed the House before but not the Senate.

House members also agreed to relax some of the proposed new controls on trading in derivatives.

Rather than subject all over-the-counter derivatives to open trading, the bill would subject such derivatives only if they were traded between Wall Street firms, or with a major player like the American International Group.

But the transactions between dealers and customers will remain largely hidden, so customers will not be able to compare the prices they are being charged with the prices charged to other customers.

The overhaul of Wall Street regulation is a top domestic priority of the Obama administration, which supported the House bill and applauded its approval.

But Treasury Secretary Timothy F. Geithner signalled that the administration would seek changes in any final measure.

Despite the House action, final legislation is not imminent.

The Senate is still developing its own measure for debate early next year and any Senate bill is likely to differ substantially from the House measure, necessitating further negotiations.

Most Democrats agreed that stiffened regulation of the financial services industry was warranted by the events leading up to the financial crisis.

Representative Steny H. Hoyer of Maryland, the House majority leader, cited what many considered a lack of adequate regulation during the administration of President George W. Bush as a central reason for the economic collapse.