WASHINGTON (Bloomberg) - Senate Banking Committee Chairman Christopher Dodd's plan for the biggest Wall Street regulatory overhaul since the 1930s drops provisions he sought in November and dilutes others as he seeks bipartisan support.

The measure shelves a single regulator that would have stripped the Federal Reserve and Federal Deposit Insurance Corp. of bank-supervision roles, and a plan to hold brokers to the same fiduciary standard as investment advisers. Dodd's plan for an independent consumer protection agency becomes a unit within the Fed and the so-called Volcker Rule to limit risky trading by banks would be introduced only after a period of study.

The Connecticut Democrat's bill, based on a proposal by President Barack Obama last June, lets regulators oversee over-the-counter derivatives, forces hedge funds bigger than $100 million to register with the Securities and Exchange Commission and empowers the Fed to force large firms to break up if they pose a "grave threat" to the economy. Some critics said it did not go far enough.

"I don't see this legislation as so momentous that it's going to halt the financial services industry in its tracks," said Gilbert Schwartz, a former Federal Reserve attorney and a partner at law firm Schwartz & Ballen LLP in Washington. "It has a lot of the same provisions that we've already seen. It's more of a ho-hum proposal."

Financial shares on Standard & Poor's 500 Index reversed most of a 1.1 percent slide after Dodd outlined his plan yesterday. The index rose 0.2 percent today at 10.24 a.m. in New York trading.

Dodd's draft is a version of his November proposal, which was panned by Senate Republicans as too far out of line to even negotiate. No Republicans signed on to support the new version and many will probably oppose the measure when it reaches committee consideration next week.

"This bill does nothing to change the expectations in the market that some firms are too big to fail," said Senator David Vitter, a Louisiana Republican who serves on the Banking Committee. "I'm disappointed that Senator Dodd has decided to abandon any sort of bipartisan approach in favor of political posturing on behalf of the Obama administration."

Dodd's bill shrinks the number of holding companies the Fed oversees and moves its state-bank supervision powers to the FDIC. This plan is more in line with the overhaul legislation the House of Representatives approved in December.

The legislation "provides broad strokes, and leaves a lot of detail up to the regulators to determine the size, scope, and impact on the industry", Morgan Stanley analyst Betsy Graseck said in a research note on Monday.

A provision to regulate the $605 trillion private swaps market makes it easier to exclude trades from being processed by clearinghouses compared with Dodd's November plan. The bill text no longer requires federal regulators to agree that excluding a swap from being cleared "is necessary and appropriate for the reduction of systemic risk".

The measure requires hedge funds managing more than $100 million to register with the SEC as investment advisers. It also gives the SEC and the Commodity Futures Trading Commission power to oversee over-the-counter derivatives.

"Just saying they are going to be loosely regulated and traded on an exchange with loopholes galore is not going to have Wall Street upset," Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said yesterday about the derivatives provision.

The bill contains a form of Obama's Volcker Rule, named for former Fed Chairman Paul Volcker, which would restrict banks' proprietary trading, and involvement with hedge funds and private equity funds.

Under Dodd's plan, regulators would define and create the rules after a study and recommendations from the proposed stability council, which could slow new rules.

The bill would make the president of the Federal Reserve Bank of New York, who supervises five of the seven largest US lenders, a White House appointee as part of a push to crack down on conflicts of interest at the central bank, Dodd said at a news conference yesterday.