The long-anticipated debate on financial services reform was scheduled to begin on the House floor yesterday. But in a bad sign for reformers, conservative Democrats managed to wring damaging concessions out of House leadership before the debate even began.

Big bank defenders, led by Melissa Bean [3] (D-IL), got language into the bill that would allow federal laws governing consumer protection to preempt many of those set by individual states and make it harder for state Attorneys General to enforce consumer protections.

Illinois Attorney General Lisa Madigan had called upon Congress to take a different course. “Don’t preempt state Attorneys General, there needs to be state level enforcement of state and federal consumer laws, particularly when the Feds fail to act,” said Madigan in a news conference.

Madigan noted that state Attorneys General were the first in the nation to spot the predatory and deceptive mortgage practices that led to the economic meltdown. They sued the big mortgage companies, forcing them to reform their sales practices and winning billions in restitution for consumers at a time when federal regulators were completely captured by the industry and actively undermining these state efforts.

Other damaging amendments will be offered on the House floor today. Most importantly, Walter Minnick [4] (D-ID), is sponsoring an amendment to kill the Consumer Financial Protection Agency, [5] the Obama administration’s flagship reform effort.

On the flip side, some amendments that strengthen the bill will also be voted upon. Bart Stupak [6] (D-MI) is offering a critical amendment that would close the loopholes in the underlying legislation with regard to derivatives trading. Warren Buffett [7] famously called derivatives “weapons of financial destruction,” and without the Stupak measure, loopholes in the regulation of derivatives would still pose a explosive threat.

A much-needed amendment by John Conyers [8] (D-MI) would help families avoid foreclosure and stay in their homes – at no cost to the taxpayers – by allowing for judicial mortgage modification. Lenders have insisted for almost three years now that they will voluntarily address the foreclosure crisis, but the record shows they’ve made too few long-term modifications, and foreclosures continue to grow as unemployment becomes the principle driver.

Illinois' top cop Lisa Madigan said, “we need a financial system that serves all the people” not just the Wall Street elite. Now is the time for Congress to decide whose side they are on in this fight and to vote for meaningful financial services reform.