Map to U.S. financial reform clearer, up to a point

WASHINGTON (Reuters) - U.S. financial regulation reform advanced on Tuesday as the House of Representatives moved toward a final vote next month, but the Senate still lacked a timetable for tightening bank and markets rules.

The House, as expected, laid out a clear schedule leading toward floor debate in November. With Democrats in firm control of the chamber, approval was widely expected.

The Senate, however, has not done the same, leaving undefined the final steps for President Barack Obama's effort to tighten regulation of banks and capital markets.

After the worst financial crisis in generations, Obama has sent Congress numerous reform proposals, ranging from creating a government watchdog for financial consumers, to imposing new curbs on the pay and bonuses of corporate executives.

The sprawling reform initiative is now deep into the compromises stage, with public hearings and closed-door Capitol Hill talks under way among lawmakers and lobbyists working to protect the interests of powerful banks and financial firms.

While key issues remain to be resolved, House Democratic Leader Steny Hoyer made clear that House action is in sight.

"We expect to bring that bill to the floor next month," Hoyer told reporters at his weekly press briefing. He and House Speaker Nancy Pelosi control the House floor schedule.

"Regulatory reform is critically important as we take every effort we can to prevent a repeat of the failure of our financial system to self-regulate," Hoyer said.

Democratic Representative Barney Frank, chairman of the House Financial Services Committee, has tentatively scheduled a bill-drafting session for October 14-16 for a likely vote on proposals to regulate the over-the-counter (OTC) derivatives market, and on the proposed watchdog, known as the Consumer Financial Protection Agency (CFPA), a House aide said.

The $450-trillion OTC derivatives market, used to hedge against risk and speculate on prices, is widely blamed for amplifying the 2008-2009 financial crisis.

Another committee drafting session was tentatively set for October 21-22 on measures to require hedge funds to register with the government and to create a federal insurance office.

Reform advocates say regulators need more information on the activities of hedge funds and other private capital pools.

The Senate Banking Committee was scheduled to hold a hearing on Wednesday on securitized assets regulation.

Committee Chairman Christopher Dodd said last week the panel might take up legislation in November, but that full Senate consideration of reforms may not come until 2010.

LOBBYISTS TESTIFY

More than a dozen lobbyists testified on Tuesday at a financial services committee hearing on administration proposals, including forcing hedge funds and other "private capital pools" register with federal regulators.

In an example of the kinds of fine points still under discussion, the committee's version of Obama's bill calls for registration, but specifically exempts venture capital firms.

At the hearing, hedge fund and private equity firm lobbyists told the committee that they don't like that exemption, while venture capital lobbyists endorsed it.

In a similar vein, the administration has proposed setting up a National Insurance Office that would not regulate insurers, but would collect information on them. It would be the federal government's first move toward nationalizing insurance industry oversight, now handled at the state level.

Insurers argued both sides of the issue at the hearing, echoing disagreements voiced among them over many years.

Some favor national regulation as it would be cheaper for them than having to comply with more than 50 state regulators.

Controversy was expected to flare on Wednesday at another hearing before Frank's committee on Obama's proposal to regulate the OTC derivatives market.

Disagreement centers on whether end-users of derivatives, ranging from airlines to agribusiness, should send OTC swap deals through clearinghouses that mutualize risk, require collateral to meet margin requirements and make public the terms of trade.

U.S. Commodity Futures Trading Commission Chairman Gary Gensler said again on Tuesday that they should. "It is incumbent to bring the entire over-the-counter marketplace under regulation," Gensler said at a press briefing.

For companies that don't already post collateral, forcing them to do so could reduce their borrowing capacity or cause them to violate terms in their credit agreements, James Hill, managing director at Morgan Stanley, will testify at the Wednesday hearing, according to prepared testimony.

A wide swath of end-users would be exempt from clearing under the OTC derivatives bill being proposed by Frank, who also wants end-users to back trades with collateral.

In the European Union, some big firms said recently in a hearing that they want to keep using customized contracts that are reasonably priced for hedging.

(Reporting by Kevin Drawbaugh, Rachelle Younglai, Charles Abbott, Donna Smith, with Karen Brettell in New York, Huw Jones in London; Editing by Andrew Hay)