By K.C. Gulino

WASHINGTON (MNI) - The House Financial Services Committee Tuesday wrestled with final details of its version of financial regulatory reform, with details changing by the hour.

Chairman Barney Frank said the fund the legislation would establish to use to dismantle failing financial institutions would be no larger than $200 billion, provided by large financial institutions.

Frank shot down a Republican request for a list of institutions that would be required to contribute, saying, "We going to change that."

The fund apparently would be intended to ease the way into oblivion for failing institutions by financing payoffs of counterparties and stem the ripple effects of any mandated wind-down of an institution.

The bill would apparently set tiers of risk among institutions, with a mutual fund ranked less risky -- and contributing less -- than a hedge fund, Frank said.

However, the bill has so many moving parts, and so many depend on each other, that ongoing changes in one section are seen making necessary succeeding changes elsewhere in the language.

Republicans are trying to create their own version of the House bill that would expand bankruptcy law to handle large failing financial institutions, an approach Frank and the Treasury Department that has worked closely with him oppose. Republicans have called Frank's proposal TARP on steroids and said it overreaches unnecessarily.

Frank now says his committee's version may not get voted on by the House until mid-December. Elsewhere on Capitol Hill, House Majority Leader Steny Hoyer announced Tuesday the leadership wants all this year's business completed by Dec. 18.

The Senate's version of financial regulatory reform will get its first committee debate Thursday and may also be hammered into final form for Senate consideration next month. But the two versions are likely to differ so much that final congressional action to combine the House and Senate bills may go into next year.

On just one front, the role of the Federal Reserve, Frank's committee and Sen. Chris Dodd's Banking Committee are at odds, with Frank willing to let the Fed retain its bank regulatory authority and the Senate unwilling to do so.

The big financial institutions, meanwhile, are mounting an increasingly aggressive campaign against any limits on size. The Financial Services forum, Goldman Sachs and JPMorgan Chase are up front in that effort while ostensibly supporting congressional efforts to create ways to shut down big institutions if necessary.

Law firms representing financial services firms are providing clients with blogged updates of what they think is happening in the "mark up" of the legislation, HR 3996. But despite the fact the session is open to the public, details were still hard to find.

Republican member of Frank's committee Shelley Moore Capito Tuesday said, "We believe the government should be out of the business of picking winners and losers; we believe that the tax payers should be out of the business of bailing out institutions too big to fail ... . Wee are offering a better alternative."

Frank evoked laughter, saying, "with regard to the Federal Reserve, I agree with everything in the bill." He added, "I believe by the time we are through with the amendments that we will be proposing there will be no taxpayer bailouts."

"He said the wind-fund he is proposing is modeled after the FDIC's insurance fund, funded by the banking industry. The FDIC's efforts, he said, "were very successful" and a "guarantee program that was funded by fees ... should be continued."

"I think our bill will provide no means by which institutions could be kept alive," he said. "It will be a way to put it out of its misery and our misery and I do think funding will be necessary."

"What we propose is a form of resolution that will lead to, in every case, the death of the company involved. There is no conservatorship anymore as a result to the amendment process we will go through, there is only receivership."

Frank said that creditors will be on notice that "you will not be wholly protected" and so they will impose added discipline on large institutions.

The resolution fund, he said, has a cap of "$200 billion."

"Here's the point. I hope the legislation we are adopting will prevent institutions from getting so overly leveraged that their inability to pay their debt can cause a systemic problem. But," he continued, "We are not yet at that point, there are institutions today who's complete collapse and inability to pay could cause systemic problems."

"We hope that will not be the case but we want to create a capacity as we are trying to downsize these institutions and deleverage them," Frank said.

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