Although Obama called for all kinds of sweeping changes in the nation’s regulatory system, it’s the Consumer Finance Protection Agency that’s drawing the most fire, The Washington Post reports.

Opposition is piling up with particular speed against the idea of a new agency with broad powers to protect borrowers and other customers of financial firms, setting up a high-stakes contest between the industry and the White House for the loyalty of a few moderate senators who increasingly hold the balance of power.

Yep, those Blue Dog Democrats again. As predatory lending expert Alan White told TWI recently, the Blue Dogs have been strong advocates for the banking industry, frustrating the efforts of more consumer-minded Democrats. It’s looking more like they’ll hold sway over the Consumer Financial Protection Agency, as well.

The Post reports that the American Bankers Association, in particular, has come out strongly against the consumer agency. House Minority Leader John Boehner (R-Ohio) also came out swinging, telling “Good Morning America” that the government will end up regulating the interest rates on credit cards and other financial products, and already has “too big a foot” in the struggling financial industry.

Could we stop for a moment of reality here? Where were people like Boehner, the American Bankers Association, and the rest of the financial industry when lenders were giving mortgages to anyone with a pulse? Where were these concerned voices when minority neighborhoods were targeted for high-rate loans? Why were the howls of outrage missing when mortgage brokers were steering borrowers into more expensive loans, even when they qualified for lower-rate mortgages?

The finance industry and its friends can complain all they want about government activism. They can attack Harvard professor and Troubled Asset Relief Program watchdog Elizabeth Warren, who first proposed the idea of such an agency. They can drag out the old arguments about how government meddling will lead to fewer or more expensive choices for consumers.

But in the end, the lending industry has no one to blame but itself for the hammer finally coming down. If banks had done anything to rein in their own excesses, the government wouldn’t be going anywhere near it. The same holds true for the deregulatory zealots in Congress who clung tightly to their ideology while lenders marketed and sold products like “Liar’s Loans,” which defied simple common sense by not requiring any documentation of a borrower’s income or assets.

Now the finance industry is trying to make the government the villain again, complaining about a more aggressive approach to consumer protection. Many conservatives will agree, saying the lending industry can’t be blamed for consumers making poor choices.

Certainly, borrowers have a responsibility to make good financial decisions — and they clearly have paid the price when they didn’t. On the lending industry side, here’s the lesson: If you don’t want the government to create an agency to protect consumers, then don’t put consumers in a position where they need someone to step in and put a stop to business practices that can only be described as predatory, abusive and wrong.

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The plan seeks to overhaul the nation’s outdated system of financial regulations. Senior officials debated using a bulldozer to clear the way for fundamental reforms but decided instead to build within the shell of the existing system, offering what amounts to an architect’s blueprint for modernizing a creaky old building.

The White House makes its case for this approach in an 85-page white paper [pdf] that describes the roots of the crisis. Gaps in regulation allowed companies to make loans many borrowers could not afford. Funding came from new kinds of investments that were poorly understood by regulators. Big firms paid employees massive bonuses, while setting aside little money to absorb potential losses.

“While this crisis had many causes, it is clear now that the government could have done more to prevent many of these problems from growing out of control and threatening the stability of our financial system,” the white paper says.

The plan is built around five key points, according to a briefing last night by senior administration officials and a copy of the white paper obtained by The Washington Post.

The proposals would greatly increase the power of the Federal Reserve, creating stronger and more consistent oversight of the largest financial firms.

It also asks Congress to authorize the government for the first time to dismantle large firms that fall into trouble, avoiding a chaotic collapse that could disrupt the economy.

Federal oversight would be extended to dark corners of the financial markets, imposing new rules on trading in complex derivatives and securities built from mortgage loans.

The government would create a new agency to protect consumers of mortgages, credit cards and other financial products.

And the administration would increase its coordination with other nations to prevent businesses from migrating to less regulated venues.

According to The Post, the plan calls for the creation of a Consumer Financial Protection agency to oversee mortgage lenders and protect borrowers, greatly expanded powers for the Federal Reserve to regulate large institutions whose collapse could pose a systemic risk to financial markets, and the merging of the troubled Office of Thrift Supervision and the Comptroller of the Currency to “to create a single agency to oversee banks with national charters.”

President Obama is expected officially announce the proposal later today, and Treasury Secretary Timothy Geithner is set to discuss the plan before the banking committees in both the House and Senate tomorrow.