The Obama administration vowed on Monday to push for even tougher financial regulation reform, as legislation heads for the Senate floor as soon as next week.

The White House proposal to clamp down on banks' risky activities shocked global markets when it was announced earlier this year, but there are signs the ideas may be watered down as other governments push forward with post-crisis clampdowns.

The bill now inching forward in the Senate would prohibit banks from proprietary trading and owning a hedge fund or private equity business, though it leaves the door open for regulators to weaken it in final implementation.

Invoking the 2007-2009 financial crisis in an appeal for action, Deputy Treasury Secretary Neal Wolin said: We will fight hard against any effort to weaken that legislation, and we will work to strengthen it further where we can.

We cannot afford to let the memory of the crisis fade without taking action.

The Senate Banking Committee approved wide-ranging Democratic legislation last month that proposes new rules for derivatives, consumer financial products and a way to ensure that no financial firm is too big to fail. The measure got no votes of support from Republicans on the committee.

Democrats are working to win enough support to ensure full Senate passage, betting that public anger over Wall Street's meltdown and taxpayer bailouts will win over some Republicans ahead of November congressional elections.

That political calculation is not lost on the Obama administration and top federal regulators, who hope to make use of the small window of time before campaigning takes precedence to push the legislation forward.

President Obama will hold a meeting with congressional Republicans and Democrats on Wednesday to discuss financial reforms. He has moved the issue to the top of his priority list since winning passage of healthcare reform last month.

WORLD EFFORTS

G20 leaders and the International Monetary Fund urged governments last month to redouble efforts in tightening up financial rules as some countries lag in curbing bank pay.

The G20's steering countries said in a letter to all group members that governments must recommit and deliver on reforms they agreed to at a summit on the financial crisis in Pittsburgh last September.

Obama first proposed measures to tighten financial oversight in mid-2009. The House of Representatives approved a bill in December. But the full Senate has yet to act, more than two years since the meltdown of former Wall Street giant Bear Stearns ushered in a crisis that led to massive bailouts.

Speaking at the same conference as Wolin, Federal Deposit Insurance Corp Chairman Sheila Bair said:

When economic conditions return to normal, risk aversion on the part of investors will decline and risk-taking by banks will return ... Unless we act now on financial reform, we could soon be planting the seeds of the next crisis.

The Senate's bill also includes provisions to make corporate boards more accountable by giving shareholders a non-binding vote on executive compensation and a way to influence the composition of a corporate board -- an idea abhorred by key Republicans and the most influential U.S. business groups.

The U.S. Securities and Exchange Commission is proposing ways to make it easier and cheaper for shareholders to nominate board directors, anyway, though it has yet to adopt final rules. U.K. investors can nominate corporate directors.

Long-term shareholders meeting reasonable ownership thresholds should have the ability to hold board members accountable by proposing alternatives and making their voices heard, Wolin said.

Bair defended her agency's move to clamp down on excessive banker pay and said financial stability is at stake. The FDIC has issued a preliminary proposal to make banks with riskier compensation schemes pay more for deposit insurance.

The stability of our financial system requires that the interests of management be aligned with all financial stakeholders in the firm - including debt and equity holders - in order to prevent the type of excessive risk-taking that led to this crisis, Bair said.

(Reporting by Corbett Daly, Karey Wutkowski and Rachelle Younglai; editing by Patrick Graham)

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