During one of his first meetings about overhauling US financial regulations in February, President Barack Obama had a question for his economic advisers, who included Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers.

“What about the families?” Obama asked, according to people familiar with the discussions. He then asked them whether they’d read the work of Elizabeth Warren, a Harvard Law School professor and longtime advocate of a national consumer financial protection agency. Michael Barr, a University of Michigan professor who was a Summers aide at the time, jumped in to say he knew Warren’s work.

“Well, what do you think about it?” asked the president, according to the accounts of the conversation.

“I think it’s a great idea,” Barr, 44, replied. The two debated the merits of such an agency during several meetings over the following three days. Then Obama offered Barr, whose own work included research on the borrowing patterns of low- income households, the job of assistant Treasury secretary for financial institutions. He was confirmed by the Senate in May.

Thus an idea that the US banking industry has learned to hate moved a giant step closer to reality. The creation of a consumer-protection agency is part of the Obama administration’s plans to enact the most wide-ranging financial regulations since the Great Depression.

Following the 1999 decision to overturn the Glass-Steagall Act that separated commercial banks from securities firms, bank lobbyists have been able to shoot down virtually any proposed rule they perceived as unfavorable to their industry, lobbyists and politicians say.

Banks and securities firms spent $193 million to fund political campaigns for the 2008 elections and raise even more money through events that their trade groups organize. They have successfully fought the administration’s efforts to limit executive pay and are battling against draft legislation governing the $592-trillion market for derivatives.

When it comes to consumer banking, the industry’s lobbyists are no longer all-powerful. Banks lost their bid to squelch new credit card rules that Obama signed into law in May. They lobbied for months before a bill that would have forced them to renegotiate mortgages failed in the Senate.

Now the banks and their trade associations are lobbying furiously to kill Obama’s plan to create the new financial protection agency, which was approved by the House Financial Services Committee in late October and is likely to face a full House vote by the end of 2009.

The different trade groups that represent the industry are also divided over how they want the bill rewritten. They will now shift their struggle to the Senate, which has yet to unveil its version of proposals overhauling financial regulations.

“Banks have lost their influence on consumer issues,” says Brian Gardner, an analyst monitoring Washington’s impact on financial services for the brokerage firm Keefe Bruyette & Woods Inc. Gardner says banks will retain their clout when it comes to more complex financial issues such as derivatives. “Folks on Capitol Hill still need to talk to the banks for the expertise on highly technical areas,” Gardner says.

Members of Congress who have traditionally been supportive of the banks’ positions are breaking ranks as popular opinion shifts strongly against the institutions. Some 80 percent of the public blames banks and other financial firms for the economic crisis, according to an ABC News-Washington Post poll in March.

“Many members of Congress who have been pro-banking and who have done the banks’ bidding are walking more cautiously since the financial meltdown,” says Rep. Maxine Waters, a California Democrat.