Political momentum was expected to carry a sweeping Wall Street reform bill to approval in the Congress, but the death of Senator Robert Byrd threatened to delay final action until mid-July.

Democratic backers of the bill scrambled on Tuesday to replace a crucial vote of support that was lost when Byrd, 92, died early on Monday, with the bill's fate turning on the views of a handful of swing-vote senators.

In the give-and-take of securing their support, reform advocates warned that the bill could be further watered down.

If they have to reopen the bill to make concessions to get additional votes ... the bill will get weaker, not stronger, said Barbara Roper, director of investor protection at the Consumer Federation of America, a watchdog group.

The bill is the biggest overhaul of financial regulation since the 1930s and a top priority of President Barack Obama following a severe banking crisis that slammed the economy.

It would force banks to reduce, but not cease, risky trading and investing; set up a new government process for liquidating troubled financial firms; and impose a $19 billion fee on the largest firms to pay for these and other changes.

But both chambers must pass the bill before it can go to Obama to be signed into law. The White House has wanted a signing ceremony by July 4. That could still happen, but an aide indicated Senate action could slip until the week of July 12, after Congress takes a weeklong break.

The House of Representatives was on track to approve the legislation as early as Wednesday.

We expect this massive rewrite of U.S. banking law will pass the House this week, but the situation in the Senate is getting more complicated, said Brian Gardner, policy analyst at investment firm Keefe Bruyette & Woods.

INVESTORS MOVING ON

While Democrats try to nail down enough votes to ensure final passage, investors and analysts are largely assuming the bill would become law.

Whether it happens this week or after Byrd's replacement is named, it will pass, said a financial-industry lobbyist who spoke on condition of anonymity.

The KBW banks index was down 2.9 percent in morning trading on Tuesday, slightly lower than the broader markets.

Final passage of the bill will alleviate some of the uncertainty that has weighed on bank stocks, but the long implementation period ahead presents many unknowns, Goldman Sachs financial services industry analysts said.

Two of the biggest question marks are appointments Obama must make. One will be the first director of a new Consumer Financial Protection Bureau called for by the bill. It would regulate mortgages, credit cards and other financial products.

Elizabeth Warren, a Harvard Law School professor, tops most short lists of contenders for the new job as the government's top financial consumer watchdog. She now chairs a panel overseeing the $700 billion Wall Street bailout.

Obama must soon name a replacement for U.S. Comptroller of the Currency John Dugan, whose role as a top bank supervisor will be made more powerful by the bill. Dugan's term expires in August, and he has said he will step down then.

The biggest banks are expected to face constraints on their profits and growth after enactment of the Dodd-Frank bill, named for its chief authors, Senator Christopher Dodd and Representative Barney Frank, both Democrats.

But some of the sharpest edges were softened to secure support as a Senate-House panel wrapped up negotiations with a marathon, 21-hour session that ended early Friday morning.

Since Byrd's passing, backers of the bill are one vote short of the 60 needed to clear a Republican procedural hurdle in the Senate. Democrats could wait for West Virginia's governor, a Democrat, to appoint Byrd's interim successor, who would likely be a Democrat, but that process could take weeks.

KEY SENATORS TARGETED

For now, Democrats are keenly focused on trying to gather and hold support among a handful of key lawmakers.

One of the biggest winners in the negotiating process was Senator Scott Brown, a moderate Republican who won major concessions for financial interests in his home state of Massachusetts and voted for the Senate version of the bill.

Brown, however, has threatened to withdraw his support due to a $19 billion industry tax that was inserted during the final negotiating session.

Senator Olympia Snowe, another moderate Republican who had previously supported the bill, also said she was concerned by the tax. I would have preferred the bank tax not to be included, she told reporters on Monday.

That tax was added to ensure that the bill does not add to the government's ballooning budget deficit. The nonpartisan Congressional Budget Office estimated on Monday night that the $26.9 billion in additional spending over a 10-year period would be offset by $26.9 billion in new revenues.

Two Democratic senators, Russ Feingold and Maria Cantwell, voted against the Senate bill last month, saying it was not tough enough. They will face pressure to support it now.

Feingold said on Monday he would not change his position.

Cantwell is still studying the 2,000-page bill and has not decided whether to support it, a spokesman said.

We believe that sheer guilt and momentum will unify all 58 Democrats. A phone call from Obama and every liberal on the planet ... could well bring over Feingold and Cantwell, said policy analysts Teddy Downey and Chris Krueger at investment firm Concept Capital.

They pointed out that 60 votes are needed to overcome the procedural hurdle in the Senate, but only 51 are needed for final passage, giving reluctant Democrats voting options.

Republican Senator Charles Grassley, who has backed the bill at stages in its journey through Congress, has not made up his mind on the final version, an aide said on Saturday.

(Additional reporting by Jeff Mason, Kim Dixon, David Morgan and Thomas Ferraro; Editing by Dan Grebler)

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