Leaders of local banks and credit unions — often at odds — are uniting to help head off a plan consolidating laws and agencies that regulate financial institutions.

The federal proposal, HR 3126, would create "one new vast bureaucracy over all consumer laws" that would prove both "costly and confusing," A. Scott Anderson, president of Zions Bank, warned the Deseret News editorial board Tuesday.

The proposal being put forth by Rep. Barney Frank, D-Mass., and Sen. Christopher Dodd, D-Conn., would consolidate financial institution and regulatory oversight into a Consumer Financial Protection Agency and set a kind of floor for consumer protection. Entities offering financial products including credit cards and mortgages, among others, would be covered. And the agency would create products for the financial entities to offer as well.

Each state would be free to enact its own consumer protection laws, as long as they were at least as strict as the federal rules.

Anderson said that rather than being consumer-friendly, the move would make activities like using a national ATM network much more complicated because each state could potentially impose its own rules.

It's a topic that has forged a rare truce in the Beehive State between leaders of the Utah Bankers Association and the Utah League of Credit Unions. The two men, Howard Headlee for the bankers and Scott F. Simpson for the credit unions, have routinely butted heads on legislative issues. But they joined Anderson and UBA chairman Sheldon Woods to present a unified front opposing formation of the new agency.

"We are already one of the most regulated industries," lamented Headlee, who said financial institutions already abide by "1,700 pages of consumer protection" rules.

He said that while banks support reforms and a "surgical look at what happened" to create recent woes for financial institutions — perhaps with formation of an independent commission like the one that investigated the Sept. 11 terrorist attacks — "this has got the foot on the throat of our economy." And he accused sponsors of "throwing in everything they haven't been able to get through on its own merits."

Woods acknowledged "gaps in the regulatory oversight of our system. There's a lot of blame to be passed around" for the financial chaos as some banks and other institutions collapsed or had to be propped up with taxpayer funds, he said.

Anderson said financial experts also are concerned because the proposal separates issues of safety and soundness from consumer protection concerns, to the detriment of the customer. And he noted that the recession, which has been largely blamed on banks in the consumer's mind, was actually because of products created by giant federal twins Fannie Mae and Freddie Mac. And 90 percent of the subprime loans were made by what will be nonregulated institutions under the act, they said.

Simpson warned that credit unions, many of them small, could be crushed by the regulatory burden. And it's likely, he said, to raise the cost to the taxpayer and the expense of financial transactions for the consumer.

They predicted the measure will pass the House, and the battle will actually take place in the Senate.

The U.S. Chamber of Commerce said it's spending roughly $2 million on ads opposing formation of the agency. But the proposal has won support from some consumer groups, as well as large merchants who want more say in such things as the fees they pay when they accept credit cards.

e-mail: lois@desnews.com