Sept. 30 (Bloomberg) -- After traveling to Manhattan this month to rally support for overhauling financial regulations, President Barack Obama invited several lawmakers to fly with him back to Washington on Air Force One. Among the chosen few: Jim Himes, a first-term congressman from Connecticut.

Himes, a former investment banker at Goldman Sachs Group Inc., belongs to a pro-business bloc of Democrats that’s playing a central role in the House Financial Services Committee’s effort to rewrite rules on bank supervision, derivatives and executive pay.

The New Democrat Coalition holds 15 of the Democrats’ 42 seats on the panel and is using that clout to push changes that may ease the plan’s impact on companies and, at the same time, improve its odds of passing.

“I spend a lot of time talking through with my colleagues what the practical implications are of the proposed legislation,” said Himes, 43. “That doesn’t make me pro-bank or anti-bank, it just gives me a feel for how what we do could affect the industry.”

Himes and his allies have already moderated the Obama plan, winning several concessions from House Financial Services Chairman Barney Frank in his draft legislation that creates a new agency to regulate credit cards, mortgages and other financial products used by consumers. Frank, a Massachusetts Democrat, plans to put a bill together over the next month with the aim of having the full House vote in November.

Frank’s Bill

The New Democrats got Frank to drop provisions that would have required banks to offer so-called plain vanilla products like 30-year mortgages or low-fee credit cards. The lawmakers were also influential in excluding non-financial companies such as accounting firms, auto dealers and retailers from the agency’s oversight.

“The original draft bill was too broadly written,” Himes said. “We are in the process of focusing it.”

Now the group is turning its attention to brokering a more difficult compromise over whether the proposed consumer agency should have the power to enforce its rules over banks that already answer to federal regulators, and whether states should be allowed to enact consumer-protection rules for nationally chartered financial institutions that are stricter than federal standards.

The coalition hasn’t taken a public position on either issue, though its members are wary of the administration proposal that gives the new regulator policing power and allows states to enforce tougher rules. Those concerns are shared by the banking industry.

Asking Questions

“They are asking a lot of the right questions,” Wayne Abernathy, an executive vice president with the American Bankers Association in Washington, said of the New Democrats. “They may be recognizing that if we are going to have a robust recovery here, it’s not going to happen without the banking industry.”

The group, founded in 1997, has 68 lawmakers from all regions of the U.S. The New Democrats share some values with the Blue Dog Coalition of centrist and conservative Democrats, though the Blue Dogs tend to focus more on budget issues and typically come from more rural districts. Along with financial services, the New Dems concentrate their policy work on national security, trade, energy and health care.

“We’re pro-growth, innovative Democrats with real-life experience,” said New York Representative Joseph Crowley, who is the coalition’s chairman and also was invited on Air Force One after the president’s speech. “Many of us come out of the business world.”

Political Contributions

Business ties also help with raising money. The 15 New Democrats on the Financial Services panel received about $1.9 million in contributions from the finance, insurance and real estate industries from Jan. 1 to June 30, according to the Center for Responsive Politics, a Washington research group. The top recipients were the co-chairmen of the group’s financial services task force: Himes, who took in $298,693, and third-term Illinois Representative Melissa Bean, who got $269,800.

Along with its support of the consumer agency, the group generally favors making the Federal Reserve the overseer of financial firms deemed too-big-to-fail -- another much-debated plank of the administration’s plan.

Having “a systemic-risk regulator is critical,” said Bean, 47, who spent 20 years working in sales at several companies and running her own consulting firm.

Bean is taking the lead on the group’s negotiations on whether a consumer agency’s rules would pre-empt state laws. The group also is playing a role in negotiating the oversight of derivatives.

Treasury’s Negotiator

Deputy Treasury Secretary Neal Wolin, one of the administration’s point people on the regulatory overhaul, said he has met one-on-one with a number of the New Democrats to hammer out compromises.

“The New Dems have been deeply engaged in the effort to modernize our regulatory system by closing loopholes, regulating derivatives and other complex financial products, and establishing a strong agency focused on the interests of American consumers,” Wolin said. “I know they that they are working closely with Chairman Frank and are committed to getting the legislation enacted by year’s end.”

With no Republicans expected to vote for the regulatory legislation in the Financial Services Committee, the New Dems represent Frank’s right flank as he works to win enough votes for its passage. Their moderating influence may help Frank draw some Republican votes when the bill reaches the House floor.

“The members of the New Democrat coalition recognize that consumers need to be protected,” said Crowley. “What we really have to be mindful of is not to overstep, so as not to stop innovation and growth.”

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

Last Updated: September 30, 2009 00:01 EDT