By Andy Sullivan
WASHINGTON (Reuters) - The death of U.S. Senator Robert Byrd deprives his fellow Democrats of a crucial vote as they seek to pass a sweeping overhaul of U.S. financial regulations and could delay the process, but the measure is still expected to become law eventually.
Widespread public support for the Wall Street crackdown means Democratic backers are likely to find the needed votes either from within their ranks or from Republicans wary of siding with the financial industry, analysts said.
"Passage of Dodd-Frank is not a question of if, but a question of when," wrote Concept Capital analysts Teddy Downey and Chris Krueger in a research note, referring to the name conferred on the bill last week after negotiators hammered out a final version from competing measures passed by the House of Representatives and Senate.
The overhaul is the most extensive rewrite of Wall Street rules since the 1930s. It boosts consumer protection and saddles the financial industry with greater oversight and tighter regulation.
The impact of the bill may not be known fully for several years as regulators put it into effect. The legislation calls for 355 potential new rulemakings, 47 studies and 74 reports, according to the U.S. Chamber of Commerce, which said the "tsunami" of regulations will perpetuate uncertainty.
It could be altered by legal challenges as well. The Supreme Court on Monday struck down part of the 2002 Sarbanes-Oxley law, which targeted corporate fraud, on the grounds that its efforts to police auditors violated the Constitution.
Democrats had hoped to give the bill final approval in the House and the Senate this week before sending it on to President Barack Obama to sign into law.
The death of Byrd, 92, on Monday leaves the bill's Democratic backers short of the 60 votes they had been counting on to clear a Republican procedural hurdle in the Senate.
MORE ARM-TWISTING
Byrd's death and a threat from Republican Senator Scott Brown to withdraw his support for the bill have forced Democrats back into vote-counting and arm-twisting.
Democrats could also wait for Byrd's successor to be named.
Including the two independents who usually vote with them, Democrats now control 58 seats in the 100-seat Senate. In May, Democrats had to scramble to muster the bare minimum 60 votes needed to end debate and move towards final approval.
"It was razor-thin to begin with, so this does introduce a new unknown into the process," Federal Deposit Insurance Corp Chairman Sheila Bair told CNBC.
Brown won significant concessions in the final bill sought by mutual funds, insurers and banks in his home state of Massachusetts. He voted for the Senate's version of the bill last month, but has threatened to withdraw his support due to a $19 billion (12.6 billion pound) industry tax that was inserted into the final version in an all-night negotiating session last week.
"Brown would face significant backlash if he decides to vote against the bill as significant concessions were made for him," wrote FBR Capital Markets analyst Edward Mills.
Democrats' timetable will slip but the bill will pass, he said.
Aides said the House could approve the bill on Tuesday or Wednesday. The Senate is not expected to take up the measure until Thursday or Friday, giving Democratic leaders several days to win extra support.
"We will wait for the House to act, but it is still possible that we could take it up this week," Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid said in an e-mail.
Two Democratic senators, Russ Feingold and Maria Cantwell, who voted against the Senate bill last month on grounds it was not tough enough are likely to face additional pressure to support the legislation now.
Cantwell is still studying the 2,000-page bill and has not yet decided whether to support it, a spokesman said.
Democrats may also hope Republican Senator Charles Grassley sides with them. Grassley was one of three Republicans who voted for the bill last month, though he also voted against it on a procedural measure.
DELAY FOR A SUCCESSOR?
Democrats could also opt to wait for West Virginia Governor Joe Manchin, a Democrat, to appoint Byrd's interim successor. That choice, most likely a Democrat, could take several weeks, forcing Democrats to miss their goal of having Obama sign the legislation into law by July 4.
"I think (Byrd's death) probably will hold up the vote, and complicates it somewhat, but I'm not sure it'll be that impactful on the final legislation," said Michael Nix at Greenwood Capital Associates.
Investors have largely accepted that the bill will become law, he said. The KBW Banks index was down marginally in late afternoon trade, lagging the broader markets slightly.
Byrd's death brought to mind the policy fallout from the 2009 death of another Senate icon, Edward Kennedy.
Kennedy's death threw a wrench into Obama's efforts to overhaul healthcare -- especially when Brown replaced him in a special election.
Even then, Democrats eventually managed to pass the healthcare bill, which enjoyed considerably less public support than the Wall Street crackdown.
An election to fill Byrd's seat would likely not take place until November 2011 or November 2012, depending on when Manchin acts.
(Additional reporting by Kevin Drawbaugh and Karey Wutkowski in Washington and Joe Rauch in Charlotte; Editing by Simon Denyer, Frances Kerry and Andrew Hay)
