A proposal from Democratic Senator Blanche Lincoln to force banks to separate swap trading desks from core operations as part of the financial regulation overhaul is a very strong proposal, a White House official said on Thursday.

Senator Lincoln has put forth a very strong proposal -- one that corresponds in very large part with the proposal in (Senator Christopher) Dodd's original bill -- and we are confident that the senators will come to the best resolution for the American people, the official said.

If the Senate bill passes, we also expect there to be a conference where the difference in the House and Senate bills are worked out, the official said.

U.S. Senate Democrats hunted for votes on Thursday needed to advance the biggest overhaul of financial regulation since the 1930s, a top policy priority of President Barack Obama that is expected to win final passage within days.

The official was asked whether the White House thinks the final version of the financial regulation regulatory reform bill that goes to Obama should allow banks to continue to trade swaps.

What is important here is that there is strong oversight of the derivatives market so these complicated financial instruments are brought out of the shadows, the official said.

(Reporting by Patricia Zengerle, Editing by Sandra Maler)

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