Turning a largely but not entirely deaf ear to warnings about over-regulating the financial industry, the House of Representatives has approved sweeping changes in the oversight of financial institutions.

The Treasury Department has received its first report card – actually two report cards -- on the management of the financial industry bail-out program (TARP). And the grades on both were poor. Both the Government Accountability Office and the Congressional panel overseeing the program found much to criticize in Treasury’s design, administration, implementation and evaluation of the $700 billion program.

If you’re looking for one word to describe the economic climate, try “confusing.” Every day seems to bring a different statistical report accompanied by conflicting interpretations of what it means. One recent headline neatly conveyed this statistical schizophrenia: “Indicators Point to Firmer Economy – More Layoffs Ahead.” Translation: The economy, measured by rising GDP, declining factory inventories and resurgent manufacturing activity —is emerging from the recession, but it is leaving unemployed workers behind.

The Obama Administration has decided that it needs a larger stick to prod mortgage lenders and servicers to help homeowners who are struggling with unaffordable mortgages avoid foreclosure. That stick is in the form of a series of measures announced by the Treasury Department, designed to increase the pace and volume of loan modifications under the Administration’s Home Affordable Mortgage Program (HAMP).

The economic recovery seems to be following the zigzag pattern many analysts have predicted: Strong gains in some sectors followed by setbacks in others — two steps forward, a step or two back, a few steps sideways. Looking more like a Rorschach test than a road map, the picture is far from clear.

Reverse mortgage lenders, battling intensifying criticism from consumer advocates and some legislators, are now facing a financial squeeze as well. To close a widening budget gap in the Home Equity Conversion Program (HECM), the Federal Housing Administration (FHA) has slashed by 10 percent the maximum amount borrowers can receive in FHA-insured reverse mortgages.

Delayed but not derailed, the homebuyer tax credit won a Congressional last week, as the House and Senate agreed to expand and extend the popular program into next year. Absent Congressional action, the credit would have expired November 30.

Delivering an expected but nonetheless unwelcome defeat to the financial services sector, the House Financial Services Committee has approved legislation establishing a new Consumer Financial Protection Agency (CFPA), with broad authority to enforce compliance with consumer protection laws.

Economists have been warning for months that the recovery, when it began, would not be smooth. Last month’s statistics confirm that prediction providing enough ups and downs to support a bipolar diagnosis.

Three months ago, Treasury Secretary Timothy Geithner summoned lenders and loan servicers to Washington to express his and the Obama Administrations intense displeasure at the slow pace at which the industry was modifying the mortgages of struggling homebuyers. Apparently, that slap heard round the world – or at least, round the financial community – had an effect.

Like an audience in search of a happy ending, economists and industry analysts are pointing to an accumulation of positive statistics as evidence that the nation’s longest and most painful downturn since the Great Depression is finally ending. But if this is in fact, the recession’s final act, it promises to be a long one. Even the optimists (still a relative term) are predicting that job losses, curbs on consumer spending, charge-offs for financial institutions and a poor climate for manufacturers and retailers will likely continue well into next year, even as the economy begins what most predict will be a slow and far from robust recovery.

As Bob Dylan noted many years ago, “You don’t have to be a weatherman to know which way the wind is blowing.” You also don’t have to be a banker today to know that consumers are furious about overdraft fees and to see that Congress and federal banking regulators are going to do something about them.

As the steepest downturn since the Depression begins to yield, slowly, to signs of recovery, economists, who had been focusing on whether the downturn has ended, are now debating how the recovery will unfold: Will it be a “normal,” robust, v-shaped recovery, with an upward trajectory almost as steep as the downturn? Or are we facing what some are calling a “new normal” — a recovery redefined by prolonged, persistent unemployment and reshaped by a profound, long-term shift in consumer psychology?

Putting the best face on the subprime crisis, multi-billion dollar losses, inflation risks recession fears, and other equally distressing headlines dominating the financial news today, you might conclude that these are certainly interesting times. But then, you might also recall the old Chinese curse: “May you live in interesting times,” which tells us that interesting times are also often unpleasant and almost always uncomfortable.

The Treasury Department’s first published review of the Home Affordable Modification Program (HAMP) results to date did nothing to refute complaints that the centerpiece of the Obama Administration’s foreclosure prevention efforts is falling well short of expectations.

Mortgage industry executives summoned to meet with Treasury Secretary Timothy Geithner last week agreed to do what they can to pick up the lagging mortgage modification pace. But they also complained that the expectations for speedy foreclosure relief were unrealistic given the complexity of the Obama Administration’s Home Affordable Modification Program (HAMP) program, the volume of modification requests, and the need for servicers to hire and train thousands of new employees.

If Shakespeare were writing today, he might still advise killing all the attorneys first. But if he followed a current trend, he might also suggest drawing a bead on appraisers as well. Real estate and financial industry trade groups, led by home builders and real estate brokers, are blaming flawed appraisals for depressing home values, delaying real estate closings and exacerbating the housing downturn.

It’s back – the bankruptcy cram down proposal, that is. Despite predictions that it was unstoppable after winning overwhelming support in the House, the measure, giving bankruptcy judges the authority to rewrite residential mortgages, flamed out in the Senate, unable to survive a blistering assault by the banking industry. Even its strongest supporters pronounced the legislation dead after only 45 Senate Democrats voted for it.

“You’ve got to admit it’s getting better.” An increasing number of economists are beginning to hum that Beatles tune, as the statistics pointing to an improving economy multiply. Economists remain divided on whether the recession has needed or is nearing an end. But a growing consensus holds that the worst of the downturn is behind us. A consensus is also forming around a less encouraging view: The recovery will be painfully slow, made more painful by the expectation that conditions should be better than they are likely to be in the near term.

As foreclosure rates continue to rise and loan modifications fall short of projections, pressure is intensifying on the Obama Administration — to push lenders and servicers harder — and on lenders and servicers (from several directions) to do more than they have done and are doing to help struggling borrowers avoid foreclosure.

How’s this for a term you haven’t heard recently in connection with the housing market: “Improvement?” It has cropped up recently in the comments of analysts, describing what is still a decidedly mixed bag of statistics that are neither as bad as they have been nor as good as industry executives and government policy-makers would like them to be.

In a decision that surprised just about everyone, the U.S. Supreme Court rebuffed the Comptroller of the Currency’s expansive federal preemption claim, ruling that states have the authority to enforce their consumer protection laws against national banks.

Providing a welcome jolt of good news to financial institutions, which haven’t had much to cheer of late, the California Supreme court ruled recently that tapping public benefit payments to pay overdraft charges or other fees — a common banking industry practice — does not violate state law or public policy.

If you’ve been following the “Thinking Out Loud” discussions posted periodically on this site, you have seen several in which Members Mortgage President Joe Zampitella has highlighted the dangers reverse mortgages pose for the seniors who obtain them and the credit unions that originate them. It appears that some federal bank regulators share his concerns about this fast-growing mortgage product.

In a still lagging effort to get ahead of a rising foreclosure tide, Congress has approved the Help Families Save their Homes Act. The measure revises an existing program – Hope for Homeowners – which has fallen well short of predictions that it would help more than 300,000 struggling homeowners avoid foreclosure by refinancing unaffordable, adjustable rate loans into lower-cost FHA-insured mortgages.