Factbox: 6 financial reforms missing from Congress bills

(Reuters) - Financial regulation reform is slowly narrowing in the U.S. Congress, where some ambitious proposals are slipping from view and others are being watered down.

A new bill unveiled by Democrats on March 15 in the Senate leaves out at least one bold idea -- creating a single agency to supervise banks -- while a bill approved in December by the House of Representatives never contemplated such a reform.

Mainly due to insurmountable opposition from Republicans, bank lobbyists and regulatory agencies protecting their turf, some changes that looked achievable a year ago at the height of the financial crisis are no longer being discussed.

Here are some reform proposals that are being left behind:

* MERGING SEC AND CFTC:

The Securities and Exchange Commission and the Commodity Futures Trading Commission regulate markets so closely linked that critics have long argued the two agencies should be one.

When the Obama administration took over in 2009 and the crisis was at its peak, a CFTC-SEC merger looked possible. But as Congress began hammering out a politically realistic set of post-crisis reforms, the merger slipped from view.

Neither agency wanted it since it would threaten jobs and turf. Financial services industry lobbyists were divided, with some favoring a merger and others against it. Some policymakers saw virtue in preserving competition between the agencies.

In the end, legislators said, in a perfect world, the two agencies would be combined, but that just isn't Washington.

* CONSOLIDATING BANK SUPERVISION:

Perhaps the boldest reform offered in November by Senate Banking Committee Chairman Christopher Dodd was to consolidate into one super-agency the bank regulation duties now scattered across several federal bureaucracies.

That idea appears to be dead, after months of lobbying against it by banks and the agencies that would have been superseded, including the Federal Reserve, the Comptroller of the Currency, and the Federal Deposit Insurance Corp.

The House bill never contemplated a plan as brash as Dodd's. He wanted to create a Financial Institutions Regulatory Administration (FIRA) to supervise all banks and put an end to today's patchwork system stitched together over decades.

But the revised Dodd bill of March 15 dropped the FIRA proposal. Instead it proposed putting the Fed in charge of bank holding companies with more than $50 billion in assets.

It shifted from the Fed to the FDIC the supervision of state-chartered banks with less than $50 billion in assets, leaving the FDIC to continue supervising other state banks.

The Office of the Comptroller of the Currency, under Dodd's more modest plan, would keep supervising nationally chartered banks with assets under $50 billion. And the OCC would absorb the Office of Thrift Supervision, which would close -- a small step toward streamlining, but far short of Dodd's FIRA plan.

* MORTGAGE 'CRAMDOWN':

In a proposal backed by homeowner activists and many Democrats, bankruptcy law would be rewritten to allow judges to change the terms of mortgages for distressed borrowers in bankruptcy court. Known as mortgage "cramdown," the idea is opposed by the banking industry and Republicans.

The House had approved a "cramdown" measure in March 2009 over the objections of Republicans, but it died in the Senate.

Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including for a boat, car, vacation home or family farm -- but not a primary residence.

Cramdown could help stem U.S. home foreclosures, its advocates say. But opponents say it would raise costs for everyone and divert capital from the mortgage debt market.

* NEW CREDIT RATING AGENCY BUSINESS MODEL:

Tighter regulation of credit rating agencies -- such as Moody's Corp, Standard & Poor's and Fitch Ratings -- is proposed by both the House bill and the new bill just released by Dodd.

But neither calls for basic change in the so-called "issuer pays" business model that critics say presents credit rating agencies with a glaring conflict of interest.

Most of the agencies' revenue comes from issuers of bonds and other debt that the agencies evaluate and rate. Critics say that can mean ratings are colored by the business needs.

Congressional aides said lawmakers could not find a way to change the business model without destroying the industry.

Rating agencies were widely blamed for not spotting subprime mortgage problems ahead of the crisis.

* FIXING FANNIE MAE AND FREDDIE MAC:

The two giants of U.S. mortgage finance -- Fannie Mae and Freddie Mac -- need a major overhaul. That much both political parties in Congress can agree on.

But the consensus pretty much ends there.

The Obama administration has said it will sketch out a reform plan for the two agencies soon and House Financial Services Committee Chairman Barney Frank is beginning new discussions on the issue among his panel's members.

But fixing Fannie and Freddie is such a contentious problem that Democrats shelved it for the time being, excluding it from both the House and Senate financial regulation reform bills.

Fannie and Freddie together own or guarantee half of all U.S. mortgages. Both were seized by the U.S. government and put into conservatorship in September 2008.

* USURY CAPS:

Some congressional Democrats want to cap credit card interest rates, but the idea is not included in either of the main House or Senate legislative packages.

Another bill offered in the Senate last year would cap rates at 36 percent for all consumer credit -- mortgages, payday loans, car title loans -- not just credit cards. It is not included in the two main legislative packages either.

Some states have usury laws. Both the main House and Senate reform packages have provisions saying how often and how far federal regulators may preempt, or block, state consumer protection laws, which can affect state usury statutes.

(Reporting by Kevin Drawbaugh; Editing by Andrea Ricci)