Nov. 4 (Bloomberg) -- The Obama administration’s push for overhauling financial regulation gained ground as Financial Services Committee Chairman Barney Frank said the U.S. House will vote on legislation by December and a long-awaited Senate measure was readied.

The administration recently has been briefed on the Senate measure, crafted by Banking Committee Chairman Christopher Dodd, an official told reporters yesterday. While the official wouldn’t reveal what’s in the measure, he praised the bill’s outline and said it would give the government the powers it needs to prevent future market crises.

The developments move President Barack Obama closer to his goal of signing a law in the coming months. Still, several minefields could delay or scuttle the effort, including differences among Democrats and a lack of Republican support in the Senate where individual lawmakers hold more sway than in the House.

“We are almost finished,” Frank, a Massachusetts Democrat, told reporters yesterday. “We’re going to be preventing a lot of this bad stuff from happening.”

Obama is pressing Congress to enact the most sweeping changes in Wall Street oversight in 75 years, arguing that excessive risk-taking by banks and lax enforcement by regulators helped cause the credit crisis and brought the financial system to the edge of collapse. While Frank’s panel is set to finish voting on a series of bills laying out the changes this month, Dodd’s legislation would be the first action in the Senate.

The administration issued its regulatory overhaul plan in June. Among measures approved in Frank’s committee is legislation creating a Consumer Financial Protection Agency to police mortgages and credit cards marketed to consumers. Yesterday, Frank backed Elizabeth Warren, a Harvard University law professor who now heads up a congressional panel overseeing the $700 billion bank bailout fund, to lead the agency.

House Debate

The committee also adopted measures to tighten rules for derivatives and require federal oversight of hedge funds.

Frank said his panel will begin debate today on legislation to give the government powers to seize and dissolve the biggest financial companies and to set up a council of regulators to monitor firms deemed too big to fail.

Dodd probably will propose creating a consumer financial agency similar to the one endorsed by Frank’s committee and the administration. The Senate bill also will limit the powers of the Federal Reserve in part by setting up a council of regulators to monitor risk in the financial system.

Dodd’s spokeswoman, Kirstin Brost, said yesterday the legislation could be introduced as soon as next week.

“The committee has spent the last year studying the issues that led to the financial crisis and weighing the best options to prevent this from happening again,” she said. “Dodd is going to push for the strongest bill he can to protect consumers and prevent another financial collapse.”

Bank Supervisors

Unlike the House and Obama plans, Dodd is likely to call for the merger of bank supervision powers, now spread over four agencies, into one body. The administration and Frank have proposed combining two agencies, the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

The government official said yesterday that the administration is open to further consolidating the bank agencies.

Dodd’s draft measure so far lacks support from the committee’s ranking Republican. An aide to Senator Richard Shelby said this week he wants to delay legislation until he and Dodd reach agreement on several issues.

The administration official, however, indicated that Democrats weren’t willing to wait. In addition, the aide said Shelby doesn’t support creating an agency to police consumer credit products -- a top priority for Dodd and Obama.

Democratic Control

With Democrats controlling Congress and the White House, the official said, and Republicans likely to stand firm against the consumer protection agency, the administration doesn’t want to scale back the legislation to win Republican votes.

Still, there are differences among Democrats on a number of issues, and the official predicted that many details of the oversight plan could change in the coming weeks.

Frank, for example, has reversed course from parts of a deal he struck last week with the Treasury Department over how to pay for winding down failing companies, saying he wants big firms to pay into a fund in advance of any collapse. The administration wants to assess financial companies after a firm is shut down.

Paying after a failure “means that you have to have the Treasury advance the money to be paid back by an assessment,” Frank said yesterday. “People are skeptical of that. We will adopt an amendment that will establish the fund” beforehand.

Treasury Role

If the fund runs dry, the Treasury Department will cover any costs and be repaid through assessments on the banking industry “with significant congressional involvement,” Frank said. The size of the fund hasn’t been determined, he said.

The official said that a prepaid fund could lead to moral hazard, in which banks believe they can assume greater risk because the government will prop them up.

Yesterday, Frank shifted on another part of the legislation he hammered out with the Treasury, agreeing to publicly name the firms that the government deems too big to fail.

“The way an institution will be publicly identified as systemically important is the day it is hit with severe, stricter constraints,” Frank said. Restraints may include higher capital requirements and limits on size or actions, he added.

To contact the reporters on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net.

Last Updated: November 4, 2009 00:01 EST