Democrats expect to have the votes needed on Thursday afternoon to advance the biggest overhaul of financial regulation since the 1930s, paving the way for a final Senate vote on passage.

The bill stumbled over a procedural roadblock on Wednesday but Richard Durbin, the Senate's No. 2 Democrat, said he believes there is sufficient support this time to move ahead.

We feel we have the votes to get it, Durbin told reporters in the Capitol.

The legislation is one of President Barack Obama's top domestic priorities.

Democrats began voting at 2:30 p.m. EDT on wrapping up debate on the bill. Approval of that motion would allow them to move toward passage.

The Senate could move to a vote on full passage of the bill as soon as Thursday, two Democratic Senate aides said.

Republicans would have to agree to that timetable. A Republican aide said no time had been set for a final vote, but it would likely come before Friday evening.

The bill, if approved, would have to be merged in conference with one passed by the House of Representatives in December.

The banking industry would benefit if the bill were approved sooner, rather than later, analysts said.

Most of the scores of possible amendments still under consideration would further threaten industry profits already under pressure from key elements of the legislation.

Among them is a proposal to force banks to spin off lucrative swap trading desks.

Senators from both parties are eager to look tough on Wall Street ahead of November mid-term Congressional elections, analysts said.

Senate debate resumed as U.S. stocks fell sharply. The Dow Jones industrial average was off 2.1 percent as a Senate panel discussed the stunning sell-off two weeks ago on May 6 that was still largely unexplained by experts and regulators.

Barney Frank, the Democratic head of a House committee, told CNBC television news it is important to get financial reform approved quickly to ease market uncertainty. He said he expected Obama could sign a bill into law well before July 4.

LINKED AMENDMENTS EYED

The Obama administration said on Thursday it supports an amendment, offered by Democrats Jeff Merkley and Carl Levin, to the overall Senate bill that would tighten the proposed Volcker rule on curbing risky proprietary trading by banks.

The rule was first proposed in January by Obama and White House economic adviser Paul Volcker.

But an administration official said the Merkley-Levin amendment should not pass at the price of approving another amendment from Republican Sam Brownback on car loans.

Brownback wants to exempt car dealers from the oversight of a new financial consumer watchdog. The Pentagon has said it opposes such a move because car dealers around military bases sometimes target service members with unfair car loans.

In a procedural twist, the Merkley-Levin and Brownback measures' fates were linked because Democrats kept the Merkley-Levin measure alive this week by tying it to Brownback's amendment. Analysts said that meant both might pass.

The administration official said, We support the Merkley Levin amendment, but we must not sacrifice protections for American families against unscrupulous auto lending practices to pass Merkley-Levin as attached to the Brownback amendment.

The official said the Dodd bill already provides strong protection against excessive risk-taking by banks.

Bank lobbyists have worked for months to weaken the Senate bill with little success. They were refocusing on prospects for watering it down in the conference after Senate passage.

TWO VOTES NEEDED

Democrats needed to find two more votes to advance the sweeping reform legislation that would tighten Wall Street rules to avoid a repeat of the 2007-2009 financial crisis.

Democratic Senator Arlen Specter, who missed Wednesday's vote after a primary election defeat in Pennsylvania, has returned to Washington and is expected to support the measure.

But Senate Democratic Leader Harry Reid still needed one more supporter in order to clear the 60-vote threshold needed to limit debate and move toward final passage.

As the vote approached, one dispute still unsettled was a provision in the bill from Democratic Senator Blanche Lincoln that would force banks to spin off lucrative swap trading desks into affiliates. Major financial groups such as JPMorgan Chase, Bank of America, and Goldman Sachs could be hit hard by such a requirement, analysts said.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, again on Thursday raised concerns. She said she hopes Congress will really think hard about whether to force U.S. banks to spin off their swap trading desks.

It could increase, not decrease, risk, Bair said.

FBR Capital Markets policy analyst Paul Miller said, We are still hearing that the requirement that banks spin off their swaps desks will not make it into the final bill.

Two Democrats withheld their support for wrapping up debate on the bill on Wednesday.

Senator Russ Feingold, one of the chamber's most liberal members, was not expected to change his position.

But Reid and other Democrats hoped Senator Maria Cantwell would decide to support the bill after she was allowed to discuss her proposal to tighten derivatives regulation.

CANTWELL SEEN POSSIBLY SWITCHING

Cantwell may be willing to switch her vote if she can get consideration of an amendment that would require all standardized swaps to be cleared, Miller said.

Republican Scott Brown also was viewed as a potential supporter. Brown had previously said he would support the bill, according to Democrats, but voted against it on Wednesday because it did not include certain unnamed provisions.

Reid met with Brown, the Senate's most junior member, on Thursday to discuss his concerns, a Democratic aide said.

He's new here, he's trying hard, Reid told reporters afterward of Brown. I'm sure it was a misunderstanding.

(Additional reporting by Karey Wutkowski, Thomas Ferraro, David Lawder and Patricia Zengerle; Editing by Andrew Hay)

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