Financial reform bill debate begins in House

James Bowers, dressed as Uncle Sam, asks people if they can ''spare a trillion'', as they walk past him in the rain outside the front of Federal Hall, near the New York Stock Exchange, October 28, 2009.

WASHINGTON (Reuters) - The House of Representatives began preliminary debate on sweeping legislation to give the government new powers over large financial firms and tighten bank and market regulation late on Wednesday.

Debate got under way only after Democrats settled differences among themselves over last-minute amendments that had kept the bill in the House Rules Committee. The terms of the agreement were not immediately clear.

President Barack Obama and most congressional Democrats see the reforms as crucial to preventing a repeat of last year's global financial crisis and the multibillion-dollar taxpayer bailouts that followed.

Some moderate Democrats were pushing to be allowed to introduce amendments on the House floor that would water down the 1,279-page bill, hammered out over months of discussion and compromise at the committee level.

House leaders hope to bring the measure to a final vote by Friday, before the holiday break.

Lawmakers were debating the procedural rule for the bill on Wednesday and were expected to begin debate on the bill itself on Thursday, as well as considering amendments. More than 200 amendments had been filed by lawmakers from both parties.

One amendment being pushed by Democratic Representative Walt Minnick would scrap a proposed Consumer Financial Protection Agency (CFPA). Instead it would set up a council of regulators to look after consumers' interests.

The administration and most Democrats support the proposed CFPA, but it is bitterly opposed by banks and other business interests. The U.S. Chamber of Commerce, the nation's largest business lobbying group, is spending heavily to block the CFPA.

OTHER AMENDMENTS

An amendment from Democratic Representative Melissa Bean would give the CFPA more power to preempt state laws that are stricter than the agency's own limits, a change favored by business, but opposed by consumer advocates.

House Financial Services Committee Chairman Barney Frank wants to amend his own bill to give regulators the power to set margin requirements in over-the-counter derivative transactions involving end users, such as automakers and airlines, that use OTC derivatives in the businesses.

Republicans have attacked the House bill as a measure that would codify bailouts and destroy jobs, while setting up new government bureaucracies and piling costs on businesses.

An army of lobbyists for banks and Wall Street have fought to block and delay the bill, which not only calls for creating a CFPA, but for regulating over-the-counter derivatives for the first time and a raft of other changes in the wake of last year's global financial crisis.

If Democrats can push the bill through the House, then financial reform would shift to the Senate, which has moved more slowly and where debate is expected to go well into 2010.

(Reporting by Kevin Drawbaugh; editing by Leslie Gevirtz)