UPDATE 1-US Rep Frank not eyeing financial firm size limits

(Adds more comments from Frank)

WASHINGTON, July 9 (Reuters) - U.S. Rep. Barney Frank said on Thursday he does not intend to seek limits on the size of financial firms as he drafts regulatory reform legislation and that restructuring mortgage finance sources Fannie Mae FNM.P and Freddie Mac FRE.P was not on his agenda for this year.

Frank, the Massachusetts Democrat chairman of the House Financial Services Committee, told reporters after a hearing that instead of size limits and similar restrictions to limit risk, he would focus on providing authority to wind down failing large financial firms and creating a systemic risk regulator.

“The biggest problem is that we have no option but total failure or a total bailout, like AIG on the one hand and Lehman on the other,” he said. Regulators need authority to “go in and fire the bank president and wipe out the debt holders, but in a more orderly way,” he said.

Frank has said that he plans to move financial reform legislation, taking cues from proposals made by the Obama administration, in pieces this summer, starting with a Financial Services vote on creating a consumer financial regulatory agency by early August.

The consumer agency would include a licensing regime for mortgage brokers and payday lenders, he said.

He said the new consumer agency would not seek to usurp any investor protection authority from the Securities and Exchange Commission, but these will be strengthened.

“We will beef up investor protection at the SEC. The point is that investor protection is a more central part of the SEC’s picture than bank customer protection is at the OCC (Office of the Comproller of the Currency).”

Almost a year after market confidence in Fannie and Freddie eroded rapidly, leading to their seizure by the U.S. Treasury, Frank said a restructuring of the housing finance behemoths was not high on his agenda for this year. It would be a top priority for next year.

“Fannie Mae and Freddie Mac are very important public utilities. They are not now contributing to the crisis,” he said. (Reporting by David Lawder, Editing by Chizu Nomiyama)