UPDATE 1-Sen. Dodd: Congress should not set accounting rules

(Adds quotes, SEC chairman's actions)

WASHINGTON, March 11 (Reuters) - U.S. Senator Christopher Dodd, chairman of the Senate Banking Committee, said on Wednesday that Congress should not set accounting standards but that mark-to-market accounting could inflate problems in down economic times.

Dodd also said restoring the so-called "uptick rule" that restricts short-sellers could be helpful during the current credit crisis.

"I have been vehemently opposed to Congress getting into the business of accounting standards," Dodd told a U.S. Chamber of Commerce event on capital markets.

Some lawmakers and the U.S. banking industry, which has been forced to write down billions of dollars' worth of hard-to-value assets in the illiquid markets, have pleaded for a suspension or modification of mark-to-market accounting rules.

Dodd said those rules can be "pro-cyclical," exacerbating losses for certain firms in distressed economic times, and that there might be some relief for firms.

Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, separately said on Wednesday that the Financial Accounting Standards Board has promised to issue mark-to-market accounting guidance in the second quarter for banks struggling to the price assets.

Schapiro also said she hoped the SEC would issue a proposal in April aimed at restoring the uptick rule, which allowed short sales only when the last sale price was higher than the previous price. It was abolished by the SEC in 2007.

Dodd said restoring the uptick rule is not the "total answer" to restoring financial stability but could be helpful.

He also told the chamber that the public-private partnership to buy banks' bad assets "couldn't come soon enough."

U.S. Treasury Secretary Timothy Geithner last month unveiled a plan to pool private capital with government funds to purchase the illiquid assets from banks in an attempt to clean up their balance sheets.

Dodd said he had not received more details on that plan, but hoped the Treasury could "move fairly quickly on this."

Regarding regulatory reform, Dodd said the United States would not likely have a systemic risk regulator in place in time for the G20 summit in early April. President Barack Obama has backed off from a plan to bring a full outline of regulatory reforms to that summit and instead is planning to bring general principles.

Dodd said he is open to the idea of the Federal Reserve becoming the systemic risk regulator responsible for monitoring the safety and soundness of the entire financial system.

But he said he is concerned the U.S. central bank could have too many responsibilities on its plate and may need to be stripped of its consumer protection role.

"The alternative is creating some new entity, which to me is a daunting idea," Dodd told reporters after his speech.

Dodd said he hoped to have a comprehensive regulatory reform bill ready by this summer instead of a series of proposals being considered in the House of Representatives. (Reporting by Karey Wutkowski, John Poirier and Rachelle Younglai, editing by Leslie Gevirtz)