Efforts to tighten financial regulation gained speed in the U.S. Senate on Thursday, with revised legislation seen as soon as next week from two key lawmakers now traveling together in Central America.

Senate Banking Committee Chairman Christopher Dodd, a Democrat, and Republican Senator Bob Corker, a first-term member of Dodd's panel, are visiting Panama, Costa Rica and other nations on a Foreign Relations Committee trip.

As they travel, the two were expected to discuss the bipartisan regulatory reform legislation they hope to unveil within days and bring before the Banking Committee, possibly for a vote as soon as the first week in March.

The Dodd-Corker talks are giving new momentum to an initiative -- one high on the White House's priority list -- that faltered last month when talks broke down between Dodd and Senator Richard Shelby, the committee's top Republican.

Corker defied Senate seniority tradition last week by stepping into the breach left by the impasse with Shelby. Since then, Dodd and Corker have been making progress toward a bipartisan agreement, said Dodd spokeswoman Kirstin Brost.

We're working with Corker and hope to have a revised bill to present next week, she said.

At the same time, amid some doubt that Corker will be able to win wide support from party colleagues for whatever he and Dodd produce, other Republicans on the panel are developing substitute legislation of their own, Senate aides said.

Separately, top White House economic adviser Lawrence Summers said in a CNBC television interview that it was crucial for Congress to move quickly on regulatory reform.

He urged action on proposals for managing risks in the financial system and establishing a new way for the government to unwind large financial firms that get into trouble.

The U.S. House of Representatives in December approved the biggest crackdown since the 1930s in bank and capital market oversight, including changes similar to what Summers suggested. No Republicans voted for the Democratic bill.

We're certainly pushing the Senate to act as rapidly as it can, Summers said. Unfortunately, the hundreds of lobbyists -- three for every congressman -- that many in the financial industry have hired ... slowed down this process.


Policy analysts have been expecting a regulatory reform bill to emerge from the banking committee and move to the Senate floor this spring, possibly in late March or April.

If the Senate approves a bill, final House-Senate compromise legislation could be on President Barack Obama's desk by mid-year, said analysts and lobbyists.

Regulatory reform has been working its way slowly through Congress for more than a year, with the aim of preventing another crisis like the one that saw the collapse in 2008 of Lehman Brothers, government-led mergers of Bear Stearns and Merrill Lynch, and bailouts of many financial firms.

A draft reform bill unveiled by Dood in November was immediately rejected by Republicans, and he and Shelby eventually came to an impasse over Obama's proposal to create a new agency to regulate consumer financial products.

Corker has said he will not accept a stand-alone agency but would consider new consumer protection powers inside a larger regulator, a compromise Democrats have discussed.


Obama complicated negotiations last month by proposing a rule to limit banks' proprietary trading, get them out of the hedge fund business, and limit their future growth -- dubbed the Volcker rule because it was inspired by White House economic adviser Paul Volcker.

Banking committee members are considering adding to their legislation a watered-down version of the Volcker rule that would lean against a strict ban on proprietary trading, but might require stronger supervision of banks involved in such activities, said sources close to the panel.

Volcker said on Thursday that he had hopes financial reform legislation will overcome partisan bickering, but that he does not consider it a sure shot.

It is difficult to get anything through the Congress. It is a familiar story and I hope that the financial legislation doesn't get bogged down in that, Volcker told reporters after speaking to a closed-door investor event in New York.

Separately, House Financial Services Committee Chairman Barney Frank announced on Thursday that his panel will hold a hearing on February 25 looking into pay practices in the financial industry -- a politically sensitive subject with many Americans angry about the bailouts and resurgent banker bonuses.

Frank said the hearing will focus on pay at firms such as bailed-out insurer AIG and mortgage finance giants Fannie Mae and Freddie Mac , both seized by the government and put into conservatorship in September 2008.

(Additional reporting by Daniel Bases and Edward Krudy in New York, with Patrick Rucker in Mexico City)