The Senate named 12 senators, including tough Wall Street critics and more moderate members, Tuesday to a panel that will finalize the most sweeping overhaul of financial regulations since the 1930s.

Working with still unnamed conferees from the House of Representatives, the group will have to iron out differences between Wall Street reform bills that were approved by the Senate last week and by the House in December.

House Financial Services Committee Chairman Barney Frank will chair the conference, his spokesman said Monday.

Senate Banking Committee Chairman Christopher Dodd tops the list of Senate members that includes senior moderates but also Blanche Lincoln, who chairs the Senate Agriculture Committee and is one of Wall Street's toughest foes.

Other lawmakers who have championed some of the most hard-hitting financial reforms, such as Richard Durbin, Jeff Merkley and Carl Levin, were excluded -- a development that analysts said could point to more centrist legislation.

The final bill hammered out by the conference will have to be approved by both chambers then sent to President Barack Obama to be signed into law. Analysts and lawmakers expect enactment could happen before July 4, capping a year-long drive to tighten the rules for banks and capital markets.

Along with healthcare reform and economic recovery, Obama has made overhauling financial regulations a top domestic priority. Voter anger at Wall Street over the global financial crisis is running high as politicians campaign for congressional elections in November.

As reported by Reuters Monday, along with Dodd and Lincoln, the other Democratic senators on the panel will be Tim Johnson, Charles Schumer, Tom Harkin, Patrick Leahy and Jack Reed. The Republicans will be Richard Shelby, Mike Crapo, Judd Gregg, Saxby Chambliss and Bob Corker.

FRANK ON SWAPS

Frank said earlier Tuesday there was no need to force banks out of the lucrative over-the-counter derivatives business -- a potentially big win for Wall Street.

He said he disagreed with language, drafted by Lincoln, in the Senate bill that could force banks to spin off their swap trading desks into affiliates. Banks should be allowed to use derivatives, Frank said in a speech.

Writing new rules for the unpoliced, $615-trillion global OTC derivatives business is one of the most contentious parts of the far-reaching regulatory reform effort, launched after the 2007-2009 financial crisis that slammed economies worldwide.

The Lincoln provision in the Senate bill could force banks such as Goldman Sachs, JPMorgan Chase and Bank of America to choose between their OTC derivatives business and their access to the Federal Reserve's emergency funds and other federal protections.

Frank said he believed another proposed restriction -- the so-called Volcker rule that would prohibit banks' proprietary trading -- was sufficient to limit their risky activities.

A version of the Volcker rule is included in the Senate bill. It would leave implementation to regulators, opening the way to watering down the rule later.

The House bill would allow regulators to bar proprietary trading -- in which banks buy and sell investments on their own books unrelated to customer needs -- in cases where financial stability is threatened but it does not explicitly endorse the rule.

Frank said he believed the Volcker rule will be adopted in the final regulation bill.

Banks would also be barred from sponsoring or investing in hedge funds and private equity funds, under the Obama administration's language.

(Additional reporting by Andy Sullivan and Thomas Ferraro in Washington and Steve Eder in New York; Editing by John O'Callaghan)

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