Battered financial industry faces more oversight

Further-reaching regulation is almost certain. Previously obscure corners of the industry now subject to few rules, such as complex derivatives and hedge funds, could face federal supervision for the first time.

Meanwhile, heavily regulated sectors, such as banking and insurance, are likely to face greater oversight. Even some financial industry groups support federal oversight for the insurance industry, which is now regulated only at the state level.

"Clearly, next year we will have more regulation," said Scott Talbott, a lobbyist for the Financial Services Roundtable, a group of the 100 biggest companies in the industry.

Having passed the bailout bill, Congress is now shifting its attention to its next steps.

"Passing this legislation is only the beginning of our work," said House Speaker Nancy Pelosi, D-Calif., just before the House approved the package.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said next year Congress will seek to overhaul housing policy and financial regulation in a legislative effort he likened to the New Deal.

"We were the EMTs rushing to the rescue of an economy that suddenly found itself choking, but now we have to perform more serious reform," Frank said.

The bailout bill, approved by the Senate Wednesday, provides $700 billion to buy bad assets from banks and other institutions to shore up the financial industry.

Hearings that begin Monday will examine the failures of current regulations. The House Oversight and Government Reform Committee, chaired by Rep. Henry Waxman, D-Calif., will hold two hearings on the causes and effects of Lehman Brothers' bankruptcy and on the $85 billion bailout of the giant insurer American International Group Inc.