The Obama administration's attempts to enact the most sweeping overhaul of financial regulations since the Great Depression hit another obstacle Friday as Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said talks to craft a bipartisan bill had stalled and that he would draft his own bill.

“While I still hope that we will ultimately have a consensus package, it is time to move the process forward,” Dodd said. He has been in negotiations with the top Republican on the committee, Sen. Richard Shelby of Alabama, in hopes of drawing GOP support for the overhaul.

But the two have been sparring for weeks over a key provision of the Obama administration's plan -- creating a powerful new federal agency to protect consumers in the financial marketplace. Dodd said the talks were at an impasse but that Shelby assured him he is still "committed to finding a consensus."

[Updated at 11 a.m.: Shelby said he remained hopeful a bipartisan deal could be reached. But he  stressed his opposition to moving consumer protection oversight of banks to a new agency, which would separate it from regulators monitoring the banks for overall "safety and soundness."

“I fully support enhancing both consumer protection and safety and soundness regulation," he said. "I will not support a bill that enhances one at the expense of the other, however." 

Shelby said he and Dodd also were at odds over how to give the government new power to dismantle large financial firms on the brink of collapse so that future bailouts would not be needed.]

Obtaining some Republican support has been seen as crucial to getting the complex legislation through the Senate. That became more of an imperative after the victory of Scott Brown in the special Senate election in Massachusetts, which gives Republicans enough votes to block any Democratic bill.

President Obama has made a financial regulatory overhaul one of his top priorities. In December, the House passed a sweeping bill that includes creation of a Consumer Financial Protection Agency, along with broad new government authority to seize and dismantle large financial firms if their failure poses a major risk to the economy, and to preemptively break up such firms if they're deemed to be too large.

But the effort has stalled in the Senate.

Dodd released a lengthy draft bill in November that went further than the administration's proposal in some key areas, such as creating a new federal banking regulator to replace four existing agencies. That proposal, however, met strong Republican resistance, sending Dodd back to the drawing board.

He assigned bipartisan teams to work on key provisions of the bill in hopes of drawing Republican support. Dodd said he hopes to draw from progress those groups have made as he instructed his staff to start drafting a bill to present to the Banking Committee this month.

"Over the past two months we have had productive bipartisan negotiations in a number of areas, and I intend to incorporate many of those agreements in this new proposal,” he said.

But Dodd, who announced last month he would not seek reelection in the fall, has been stymied by strong opposition to the new agency by Wall Street. And he complained this week that the Obama administration further complicated his efforts by recently proposing tough new restrictions on the risks that could be taken by banks that have commercial deposits. Large banks oppose those as well.

-- Jim Puzzanghera

Photo: Sen. Chris Dodd. Credit: Kris Connor / Getty Images

The banking industry is adamantly opposed to the Obama administration’s proposal for a Consumer Financial Protection Agency.

But in its fight to derail the idea, the industry won’t get help from one of its biggest names: Bank of America Corp. Under new Chief Executive Brian Moynihan, who took over Jan. 1, BofA has decided that it won’t formally oppose creation of the watchdog agency, Bloomberg News reports:

Moynihan informed White House and U.S. Treasury Department officials of the company’s stance last month, bank spokesman James Mahoney said in an interview. While not endorsing the agency, the bank agrees with the “policy direction,” Mahoney said.

“We’ve made it clear to various organizations of which we are part that we aren’t lobbying against the agency,” Mahoney said. The bank also isn’t promoting the concept, leaving the decision to Congress and U.S. agencies, he said.

Moynihan, 50, has been trying to repair the megabank’s image in Washington after the stormy tenure of previous CEO Ken Lewis.

The Wall Street Journal reported this week that Moynihan “spent five of his first 13 working days as CEO in Washington. People close to the bank say he wants to revamp the company’s recalcitrant reputation, have a voice in new legislation and avoid a rerun of last year’s sparring with U.S. officials, which led to regulatory handcuffs, a forced overhaul of the bank’s board and Mr. Lewis’ departure.”

His banker peers may believe that Moynihan is being naive in dealing with regulators, but he seems to be genuinely interested in accommodation.

Interviewed after he had a private meeting with other financial CEOs at the World Economic Forum in Davos, Switzerland, this week, Moynihan told Bloomberg:

A lot of the discussion is how do we get engaged, how do we make sure that we are shaping the dialogue [with regulators] in a way that balances all of the things that we want to make sure don’t happen with all of the things we want to make sure do happen.

Apparently, the Consumer Financial Protection Agency is not on Moynihan’s list of things that he couldn’t live with as a banker -- despite the rest of the industry’s fierce opposition.

-- Tom Petruno

Photo: Bank of America CEO Brian Moynihan. Credit: Pierre Verdy / AFP / Getty Images

--- What to do about record federal budget deficits? Bring them down, of course -- but later, not now, Treasury Secretary Timothy F. Geithner tells Congress. Meanwhile, Moody’s warns again about Uncle Sam’s AAA credit rating. And Jeffrey Garten wonders if it will finally take a no-confidence vote by America’s creditors (particularly China) to force serious deficit reduction. Where have we heard that before?

--- Discount brokerage commission war: Fidelity cuts its basic commission rate to $7.95, after Charles Schwab slashed its rate last month to $8.95. This is the good kind of deflation.

--- The U.S. homeownership rate is back to 2000 levels: It ended last year at 67.2%, down from 67.5% a year earlier and down from the peak of 69.2% in 2004. How low can it go?

--- How the major financial websites could improve themselves: Here's one investor's list of ideas.

-- Tom Petruno

The huge California tax-free municipal bond market has a lot riding on proposed tax changes in President Obama’s budget.

The administration’s call to restore higher tax brackets for the nation’s top income-earners, by allowing President George W. Bush’s tax cuts to expire as scheduled next Jan. 1, could fuel more investor demand for tax-free bonds. That would be good for current bond owners, and for muni issuers, if the result is to push down interest rates on new bonds.

But Obama also proposes to reduce the federal subsidy for a new breed of taxable muni bonds -- so-called Build America Bonds -- that some state and local borrowers began to issue a year ago in place of tax-free securities.

That lower subsidy could give borrowers, including California, less incentive to issue the taxable bonds. If they shift their borrowing back to the tax-free market, that would mean more supply of standard munis, which could put upward pressure on market interest rates.

For the country’s highest-income earners -- singles earning more than $200,000 and couples earning more than $250,000 -- the White House proposes to restore the top two marginal tax brackets of 36% and 39.6%, up from the current 33% and 35% rates. That almost certainly should boost the appeal of tax-free munis: They’re the last legal tax dodge for many investors.

In the 35% tax bracket, a tax-free yield of 4.5% is worth the same as a 6.9% yield on a taxable investment. In the 39.6% bracket that 4.5% tax-free yield would be worth the same as a 7.4% taxable yield.

Obama also proposes to restrict high-income-earners’ tax deductions, which would give them more incentive to seek out investments that produce higher after-tax returns.

Meanwhile, the administration’s proposed changes to the Build America Bonds program could have a significant impact on the California muni market: The state and its municipalities have been big beneficiaries of that year-old program.

BABs allow muni issuers to sell long-term taxable bonds to finance infrastructure projects and have Uncle Sam pick up 35% of the gross interest cost. The idea was to make it cheaper for many issuers to finance projects with taxable bonds than with tax-free bonds, and to open the muni market to a wider mix of institutional investors that typically limit their bond investments to taxable securities.

California issuers have sold $16.3 billion of BABs over the last year, 23% of the total of $71.5 billion of BABs issued nationwide, according to data firm Municipal Market Advisors. More telling is that California issuers of BABs account for 29% of the total federal subsidy under the program, in part because the state’s fiscal mess has forced it to pay above-average interest rates to borrow.

The federal government is aiming to slash its greenhouse gas emissions 28% by 2020, President Obama said today.

The government is the country’s single-largest energy consumer, having paid nearly $25 billion for electricity and fuel in 2008, accounting for roughly 1.5% of the total spending on primary energy in the U.S.

The new goal, based off a 2008 baseline and spawned by an executive order, would help avoid $8 billion to $11 billion in energy costs over the period.

The move could reduce energy use by the equivalent of 646 trillion BTUs, or 205 million barrels of oil, having the effect of taking 17 million cars off the road for one year, the White House said.

Currently, the government runs 600,000 vehicles and 500,000 buildings, said Nancy Sutley, chair of the White House Council on Environmental Quality.

“We have a responsibility to lead by example in sustainability and in our efforts to build a clean energy economy,” she said in a conference call today.

The Treasury Department, for example, is hoping to cut its emissions by a third, said Daniel Tangherlini, assistant secretary for management and chief financial officer.

The Defense Department, which owns 300,000 buildings and 160,000 commercial vehicles, is trying to reduce emissions in its non-combat areas by 34%, said Dorothy Robyn, deputy undersecretary for installations and the environment.

Currently, the department’s installations and fleet account for around a quarter of Defense’s energy consumption and roughly 40% of its emissions, she said. In 2008, the department spent $20 billion on its energy bill, and another $14 billion in 2009 after oil prices slipped.

While the department will report energy use from its combat, or operational activities, Robyn said the sector would not be subject to a reduction target.

“For us, this is all about mission effectiveness,” Robyn said, calling energy a “life and death” issue. Heavy reliance on fossil fuels, which must be transported in heavily guarded convoys to troops stationed in places such as Iraq, can be dangerous she said.

“We are doing a lot, and we will be doing more,” she said. “It’s a challenge, and we like challenges.”

Executive order 13514, which Obama signed Oct. 5, required all federal agencies to submit a target for reducing greenhouse gas emissions to the environmental council and the Director of the Office of Management and Budget by Jan. 4. The 28% goal announced today was compiled by aggregating the 35 reports.

Once agencies become more energy efficient and begin adopting alternative energy sources such as solar and wind and switching to hybrid or electric cars, the plan could spark private-sector jobs, drive long-term savings and boost innovation, according to the government.

-- Tiffany Hsu