SCENARIOS-How U.S. financial regulation fight might play out

WASHINGTON, March 4 (Reuters) - The debate over financial regulation overhaul has a long way to go in the U.S. Congress, with the action now centered in a Senate committee, where analysts and aides see some possible scenarios.

Here is a look at what could be ahead for Democrats and Republicans as they thrash out possibly the biggest regulatory changes since the 1930s.

BANKING COMMITTEE COMPROMISES

Senate Banking Committee Chairman Christopher Dodd is on track to ask soon for committee approval of a bipartisan bill that looks to be watered down from earlier proposals.

In negotiations with Republicans, Dodd has scaled back an initial draft he put forward in November. His latest package is narrower than a bill approved by the House of Representatives in December and President Barack Obama's mid-2009 plan.

The Dodd bill will probably have the backing of at least one Republican, Senator Bob Corker, and possibly the panel's top Republican, Senator Richard Shelby, as well.

If it does, some senior committee Democrats may offer amendments to try to toughen it, but the bill will likely win committee approval with few modifications. Approval would move the measure and the fight to the Senate floor.

Analysts expect a committee decision in March or early April. The bill could be on the Senate floor in April or May.

DEMOCRATS MUTINY IN COMMITTEE

One possible surprise -- pro-reform Democrats so dislike the Dodd bill that they bolt and push through amendments at the committee level to toughen it. That could result in sending a Democratic bill, not a bipartisan one, to the floor.

BILL DIES IN COMMITTEE

Another potential shocker -- the Dodd bill fails to win enough support in committee and dies there, ending for now Congress's push for financial reform and handing Obama and Dodd an embarrassing defeat. Analysts view this as unlikely.

Such an outcome would leave an unsettling cloud of regulatory uncertainty over the financial sector.

BIPARTISAN BILL ON FLOOR

If a bipartisan compromise arrives on the floor, a flood of amendments is sure to follow from both parties.

Some Democrats have already vowed to try to harden the bill on issues such as consumer protection and derivatives rules.

Republicans determined to kill it will try to block the bill with procedural obstacles and amendments that could "load the tree" until it collapses from its own weight.

To navigate through this, Dodd will have to retain substantial Democratic support and win over just a few Republicans to overcome the procedural roadblocks.

If he can do this, analysts say, a bill could pass in May or June. Next would be merging it with the House bill.

DEMOCRATIC BILL ON FLOOR

If a purely Democratic bill arrives on the floor, a fight with Republicans will erupt, along with a fresh wave of lobbying against the measure by banks and Wall Street interests.

This scenario appeals to some pro-reform Democrats who are convinced the Republicans are on the wrong political side of the issue ahead of November's congressional elections.

Some Democrats say Republicans would have two options: vote to kill the bill and face the consequences with voters, or try to amend it to achieve the best bill they can.

The strategy is high-risk. If Republicans decide to legislate and not kill the bill, the outcome could be a resounding bipartisan victory, and an achievement for Obama.

If Republicans pursue an obstructionist approach and prevail, Democrats would have a weapon to use against them in November with voters, but financial reform will be dead.

Again, analysts doubt this scenario will develop.

HOUSE-SENATE COMPROMISE

If the Senate can produce a bill, it will almost certainly be more moderate than the one backed in December by the House, which garnered no Republican support.

Merging the two bills could be done in a back-and-forth process by the two chambers, or through a conference committee. In either case, House Financial Services Committee Chairman Barney Frank will play a central role.

He is an advocate of tough reforms closer to the Obama proposals than Dodd's measure. Frank will push to toughen the Senate bill, but may not have much success.

Whatever results from a House-Senate compromise will have to win approval from both chambers. So the Senate bill could be the high-water mark of financial reform in this Congress.

OBAMA VETO?

The White House has signaled it wants a tough bill and Obama could veto a measure that doesn't meet his expectations.

But with disappointing outcomes on other fronts, such as healthcare and climate change, Obama and the Democrats need a victory going into November. That could be financial reform. (Reporting by Kevin Drawbaugh)