updated 12/2/2009 11:11:46 AM ET 2009-12-02T16:11:46

A House panel has approved legislation that slaps new restraints on big Wall Street institutions and demands greater openness from the nation's central bank. The bill is part of a sweeping regulatory overhaul that the House plans to vote on next week.

The House Financial Services Committee voted 31-27 along party lines Wednesday for legislation that would give the government the right to dismantle financial firms that pose a risk to the economy, even if they are healthy. The bill would also require a broad congressional audit of the privacy-shrouded Federal Reserve and would assess fees up front on large financial institutions to pay for the failure of their competitors.

Ten members of the Congressional Black Caucus did not vote, signaling their continuing demands that the Obama administration address unrelated joblessness issues facing the black community, where unemployment far exceeds the national average.

Their absence from the vote signal potential troubles ahead for the comprehensive regulatory package if their concerns are not addressed. Forty-one House members, all Democrats, are members of the caucus.

In a statement Tuesday evening, White House spokeswoman Jennifer Psaki said: "The president's top priority is economic recovery and we understand the profound impact that the recession is having on the African-American community. We welcome a continuing dialogue with the CBC on how we can collaborate to implement the president's agenda to support economic growth and opportunity for all Americans."

Passage of the Financial Services Committee bill sets the stage for a full House vote as early as next week on comprehensive regulatory changes, ranging from the creation of a new consumer finance protection agency to restrictions on complex financial instruments blamed for feeding last year's panic.

Provisions weakened
Some tough provisions requested by the Obama administration have been removed or weakened through exceptions. In the case of the Fed audit and the fee assessment on financial firms, however, administration officials have said the committee was too harsh. Some adjustments were still under way Tuesday, particularly aimed at toughening restrictions on derivatives trading.

Committee Chairman Barney Frank, D-Mass., faced not only Republican opposition to most provisions but also had to compromise with moderate Democrats who were not eager to go as far as Obama.

"You make trade-offs," Frank said Tuesday. "I think our bill came out stronger than I was afraid it would given where the membership was."

Regulatory efforts in the Senate were moving at a slower pace.

Banking Committee Chairman Christopher Dodd, after introducing a draft piece of legislation before Thanksgiving that was panned by Republicans, has asked Democrats and Republicans on his committee to split up into issue-based groups to work out compromises.

While Dodd, a Connecticut Democrat, initially aimed to have the legislation clear his committee this month, that could slip into next year.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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