Small investors angry with Wall Street about their battered portfolios see little relief coming from the U.S. Congress as it attempts the most sweeping overhaul of financial regulation since the 1930s.

After the financial crisis wiped out much of the retirement savings of many Americans and left thousands of mortgages under water, consumers largely are mistrustful and skeptical about their would-be saviors on Capitol Hill.

Allen Holdsworth, a retired farmer from western Illinois who manages his own portfolio, doubted that lawmakers who never take any blame for anything will be able to fix the system satisfactorily.

They'll make some changes and some of them will be good and some of them will be bad. There'll still be another bubble in something at some point. There always is, Holdsworth said.

The legislation proposes the creation of a consumer financial protection entity, aims to stop abusive mortgage and credit card practices, and could require that financial advisers put investors' interests first.

Differing versions have passed the House of Representatives and the Senate, advancing the bill to a conference committee that reach a compromise on a final, unified bill that can then go to President Barack Obama to be signed into law.

Adam Ritt of Better Investing, a non-profit organization that serves investment clubs, said regulation was unlikely to avert the next crisis.

It might help for the time being but banks might find new and exciting ways to get into trouble down the road, Ritt said.


Americans have less confidence in the financial services industry than they did a year ago, according to survey released on Wednesday by AlixPartners, a global business advisory firm. Some 36 percent of the survey's 1,000 respondents said they distrust banks more than they did in May 2009, despite the uptick in the economy.

The poll also found investors split on how they felt about the legislation. Twenty percent said they were less likely to invest, 19 percent said they were more likely to invest, and 22 percent were not sure. Thirty-nine percent would not change investment behavior.

People don't understand, are skeptical, or don't know what this is going to do for them, said Will Harris of AlixPartners.

Compared to Wall Street, Congress enjoys a slightly better image.

Anne Cherry, 53, a freelance book editor, is selling her Connecticut condominium in what is known as a short sale -- a practice in which a lender agrees to accept a sale price that falls short of the outstanding balance of the mortgage, saving the homeowner from having to cough up additional cash to pay off the loan.

Sitting in a park behind the New York City office building that once housed Lehman Brothers, Cherry said she hopes financial reforms will clean up the mess.

H. Claude Shostal, 70, who teaches real estate classes at New York University, was also optimistic.

What is on the table is extensive, meaningful and will go a long way, Shostal said nearby.

His biggest concern was that the financial services industry and its well-funded lobbyists would find loopholes.

Others worry that too much regulation will drive financial services out of the United States or that too little will be insufficient.

The problem with all these laws really depends on enforcement, said Charles Rotblut, vice president of the American Association of Individual Investors, a non-profit group focused on investor information and education. It doesn't matter how many laws we have on books, if we don't have proper staffing at the (Securities and Exchange Commission) and other regulatory bodies to enforce these laws.

(Editing by Leslie Adler)