By John Shaw

WASHINGTON (MNI) - Senate Banking Committee Chairman Chris Dodd will take his new financial regulatory review plan out for its first test drive Thursday and he will soon find out if his colleagues view his package as the legislative equivalent of a Toyota Camry or, more ominously, a Ford Pinto.

The Senate Banking Committee is meeting Thursday morning to begin discussion of Dodd's plan. The session will include only opening statements by the members of the panel.

The Banking Committee will begin considering amendments during a session on Dec. 2. It is unclear how long that mark-up will take and when any package might be considered by the full Senate.

Almost all plausible scenarios envision the Senate debate financial regulatory reform to occur early next year, at the soonest.

But Dodd must first convince his panel that his bill overhauls the U.S.'s regulatory regime in a positive way.

"This is not time for timidity in this area," Dodd said last week, when he unveiled his bill

"This is a time for some sweeping and bold changes," he added.

Senators on the Banking panel are eager to hear Dodd make the case for creating a single federal banking regulator.

Dodd's bill would consolidate the regulatory power of the Federal Reserve, the FDIC, the Office of Thrift Supervision and the Comptroller of the Currency into a single entity called the Financial Institutions Regulatory Administration.

He has said this would end the current complicated system of multiple banks regulators which result in conflicting regulation, duplication, overlap, and charter shopping by banks.

Dodd's plan also creates a separate entity, the Agency for Financial Stability, to create, monitor, and regulate large financial institutions whose failure could cause a risk to the broader economy,

The Senate Banking panel chairman will also presumably flesh out his vision of the future role of the Fed.

"I really want the Federal Reserve to get back to its core enterprises," Dodd said last week.

Dodd said that one of his central goals is to get the Fed to return to its traditional focus on monetary policy and assessing financial stability in the overall system -- and out of areas such as consumer protection.

Dodd's bill would create a new consumer financial protection agency and establish a process to unwind financial firms. It would create a new office of Credit Rating Agencies at the Securities and Exchange Commission to bolster the regulation of credit rating agencies.

Under Dodd's bill, over-the-counter derivatives would be regulated by the SEC and the CFTC and more would be cleared through centralized clearing houses and traded on exchanges. Uncleared swaps would be subject to margin and capital requirements and all trades would be reported so that regulators can monitor risk.

Hedge funds worth over $100 million would be required to register with the SEC as investment advisers and to disclose financial data needed to monitor systemic risk and protect investors.

At his briefing last week, Dodd said his plan is a "discussion draft" that will be modified as it is reviewed by his panel. He said he is "confident and optimistic" that Republicans will work with him to craft a consensus bill.

One of the most interesting features of Thursday's hearing will be the tone and substance of Republican reaction to Dodd's bill.

Sen. Richard Shelby, the ranking Republican on the Banking panel, participated in early talks with Dodd on his bill, but then opted to leave the talks.

Many senators will be eager to see if Shelby signals a desire to work with Dodd to revise his plan or retreats into implacable opposition.

As Dodd prepares for the first test drive of his plan, House Financial Services Committee Chairman Barney Frank hopes to bring his plan to the finish line this week.

Frank's committee has been working for more than a month on passing individual regulatory reform bills, with the expectation that these various bills will be put before the House in early December as one comprehensive package.

Frank's panel reconvened Tuesday and Wednesday to work on the final major part of his plan: creating legislation to limit systemic risks to the financial markets and overall economy.

** Market News International Washington Bureau: 202-371-2121 **