The U.S. House of Representatives was expected to approve the biggest changes in financial regulation since the Great Depression on Friday, marking a win for the Obama administration.

With the Senate due to debate reforms well into next year, the House could complete its legislative work by passing a 1,279-page bill that has been hammered out in the months since 2008's global banking and capital markets crisis.

The debacle and the deep recession and the taxpayer bailouts of firms such as American International Group Inc and Citigroup Inc that followed, convinced President U.S. Barack Obama and fellow Democrats of an urgent need to tighten bank and capital market oversight.

Republicans and an army of lobbyists for banks and Wall Street firms, whose profits would be threatened by reforms, have fought for months to weaken and delay the bill, arguing it is an unneeded and costly intrusion on business.

The House bill still faces potential amendments on the House floor, including one that would gut a key provision -- the proposed creation of a Consumer Financial Protection Agency (CFPA) -- and another to change mortgage bankruptcy law.

The House Friday rejected, by a 153-271 vote, an amendment that would have required small corporations with market capitalization of less than $75 million to get external reviews of their internal financial controls under regulations passed after the Enron fiasco.

The amendment concerned certain audits under the 2002 Sarbanes-Oxley laws. By rejecting the proposal that was supported by senior Democrats, lawmakers endorsed an earlier measure calling for permanently exempting small firms from complying with the rules for audits.

The House approved a section of the broad reforms bill on Thursday that would impose regulation for the first time on the $450 trillion over-the-counter derivatives market, including credit default swaps like those at the root of AIG's problems.

The bill will increase transparency in the marketplace and reduce the systemic risk that over-the-counter derivatives can pose to the economy if left unchecked, said Democratic House Agriculture Committee Chairman Collin Peterson in a statement.

The House also backed an amendment from Democratic Representative Stephen Lynch to limit financial firms to 20 percent ownership stakes in OTC derivatives clearinghouses.

If ultimately approved, the Lynch measure could affect Wall Street giants that dominate OTC derivatives markets -- Goldman Sachs Group Inc, JPMorgan Chase & Co, Citigroup, Bank of America Corp and Morgan Stanley -- and exchange operators such as Nasdaq OMX.

The House bill would also give the government new powers over large banks and set up the CFPA to regulate credit cards, mortgages and other consumer financial products, stripping existing agencies of consumer protection duties.

It would create an inter-agency council to police systemic risk in the economy, crack down on hedge funds and credit rating agencies, and expose Federal Reserve monetary policy to unprecedented congressional scrutiny among other reforms.

Democrats withdrew an amendment to the reform bill that would have narrowed an exemption for car dealers from oversight by the proposed Consumer Financial Protection Agency, saying the issue was being addressed elsewhere.

Later on Friday, two contentious amendments will be debated.

One, offered by Democratic Representative John Conyers, would let bankruptcy judges change the terms of mortgages for distressed homeowners in bankruptcy court -- a long-cherished goal of homeowner advocates that has garnered more attention amid soaring foreclosures.

The House passed virtually the same measure -- known as mortgage cramdown -- in March over the objections of Republicans and banking lobbyists, but it died in the Senate.

Another amendment, from Democratic Representative Walt Minnick, would scrap the proposed CFPA and replace it with a council of regulators.

The White House criticized the Minnick measure on Thursday, saying it would let big banks, mortgage companies and credit card companies ... continue to get away with the practices that helped cause the financial crisis.

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