Frank: House won’t vote on financial overhaul until Dec.

Rep. Barney Frank (D-Mass.) on Tuesday said the House would vote on a wide-ranging financial overhaul no earlier than the first week in December.

Frank, the chairman of the House Financial Services Committee, said that as part of the overhaul he is pursuing policies that would grant the federal government broad powers to break up large, troubled financial institutions and would curb the Federal Reserve’s power to prop up specific firms.

The Senate has yet to mark up any of the legislation, and most analysts predict that Congress will not send the president a bill to sign until 2010.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) is drafting legislation behind the scenes, and an administration official said on Tuesday that the Senate is not far behind the pace set in the House. Dodd publicly has taken several positions that differ from the administration and Frank, most notably that he is in favor of the consolidation of the nation’s four banking regulators. The administration official said the Dodd language under discussion is an encouraging start.

Frank is currently weighing one of the thorniest aspects of the overhaul, a measure that would give the government new powers to regulate systemic risk and break up failing financial institutions that threaten the wider economy.

Treasury Secretary Timothy Geithner has said that “resolution authority” is one of the most important pieces of the overhaul. That paired with legislation that creates a new “systemic risk council” will be considered in markups that will likely last until the end of November, Frank said.

Referring to the 1930s-era Glass-Steagall Act, which prohibited banks from doing both commercial and investment bank business, Frank said he could see the new systemic risk regulator imposing “Glass-Steagall institution by institution.”

The Federal Reserve is designated in the legislation as the main regulator to oversee large, systemically important financial firms.

That would allow the government to break up institutions and reduce them by size or other measures. “The systemic risk regulator, I believe, will be given explicit mandates to step in when there is a troubled institution,” Frank said.

Separately, Frank struck a tough tone on the scope and power of the Federal Reserve. Throughout the crisis, the central bank relied on legislation dating back to the 1930s granting broad powers to the bank in “unusual and exigent” circumstances.

The power is known in the financial industry as “13(3)” for the section of the statute that created the authority. The power was invoked at numerous critical turning points in the crisis, for example to aid Bear Stearns and American International Group (AIG).

But Frank said on Tuesday that he supports limiting that power so that the Federal Reserve cannot move directly to prop up specific financial firms. Frank supports giving the Fed power to create a separate facility that could be used in times of crisis to support parts of the financial industry, but not have the Fed lend directly to specific firms.

The systemic risk council would have a say in the creation of the facility that would spread the political accountability to a wider array of regulators for making the decisions.

His comments tap into a broader debate about whether the government should have the power to break up large institutions.