Democratic congressional leaders do not think the Fed's new mortgage rules go far enough and have indicated that they are considering taking power away from the Fed when it comes to protecting consumers, according to a story in today's Wall Street Journal. Senator Chris Dodd, Chairman of the Senate Banking Committee and one of the key leaders on this issue, told the Journal that the Fed's moves are a "clear signal that legislation is necessary to help protect homeowners from abusive and predatory lending practices." He also indicated that he is considering reexamining legislation he introduced last week to take power away from the central bank when it comes to consumer protection.

Rep. Barney Frank, who is chairman of the House Banking Committee, wasn't any happier with what he heard form the Fed. He told the Journal, "We now have confirmation of two facts we have known for some time. One, the Federal Reserve System is not a strong advocate for consumers, and two, there is no Santa Claus. People who are surprised by the one are presumably surprised by the other."

Bankers, seeing the writing on the wall and hoping that the Fed's changes will pacify critics, primarily supported the new rules. According to the Journal, the American Financial Services Association called the Fed's rules "measured" and the Independent Community Bankers of America said it was "an important step." But, the powerful American Bankers Association still hopes it can sway the Fed to ease the rules. It said some parts of the proposal were too rigid and "could make it harder for bankers to tailor products for their customers."

Well guys, I think you'd better reconsider any opposition to the Fed's rules because what Congress comes up with could be much worse for you. The Fed is caught in a careful balancing act and could lose its control of Regulation Z (which is what the new rules change) if Congress does act as Dodd threatens. Bankers would be wise to get behind the Fed if they want to help the Fed maintain control of the consumer side of the banking rules.

As foreclosures continue to increase next year, an election year, Congress will feel more and more pressure to act. The Fed's rules change may be just enough to persuade some lawmakers to support the Fed and stop changes to the current consumer side of the banking rules. The Fed knows it's under fire and even allowed television cameras to record audio and video during its entire meeting yesterday, which it's never allowed before. The Fed is widely known for its love of secrecy during its deliberations.

Lita Epstein has written more than 20 books including the Complete idiot's Guide to the Federal Reserve.