WASHINGTON — Lost amid last week's bad economic news, an unexpectedly partisan vote on the stimulus and President Obama's saber-rattling over Wall Street bonuses were the opening shots of a battle over how far Washington should go to reshape the financial system.
But the clash won't remain in the shadows for long.
The administration is under mounting pressure to deploy hundreds of billions -- perhaps trillions -- of new dollars to shore up financial firms into which the government has already poured a fortune. Analysts say the only way to make such a politically unpopular step palatable is for the new president to explain what he'll do to ensure the problem never happens again.
That means a return to the kind of regulatory system that Wall Street and economic conservatives fought to dismantle going back to Ronald Reagan's presidency and continuing through that of George W. Bush -- or something even more stringent.
Nor is the fight likely to remain confined to finance.
In laying out its plan for revamping the money business, analysts say, the administration will offer the first hints of how aggressively it is prepared to intervene in other damaged or seemingly dysfunctional sectors of the economy such as housing, healthcare, autos and energy.
"The battle is joined between those who say that the reason for the current crisis is insufficient government regulation and those who say that the cause was excessive government involvement in the economy," said Peter J. Wallison, a fellow with the conservative American Enterprise Institute and an architect of the Reagan administration's deregulation drive.
The condition of the nation's big financial institutions and the question of whether many are sinking into a new round of trouble have been the sleeper issues in the administration's early weeks.
While Obama has sought to train public attention on his plan for jolting the economy back to growth with an $800-billion-plus stimulus plan -- a version of which passed the House last week -- Federal Reserve Chairman Ben S. Bernanke and others have warned that the financial system may be taking another turn for the worse and require another expensive fix.
Newly installed Treasury Secretary Timothy F. Geithner is expected to outline the administration's proposed fix in a matter of weeks, if not sooner.
