The Senate was expected to approve legislation that would increase the Federal Deposit Insurance Corp.'s borrowing authority.

The bill, sponsored by Senate Banking Committee Chairman Chris Dodd, would more than triple the FDIC's permanent borrowing authority, to $100 billion, with emergency authority to borrow up to $500 billion. A final vote was expected late Tuesday or early today.

The extra funding would let the agency reduce the emergency premiums it plans to levy against bankers this year to rebuild the Deposit Insurance Fund. The legislation would also expand the FDIC's systemic risk special assessment authority, so that it can assess bank holding companies.

The bill would extend the temporary increase in deposit coverage to $250,000 for four more years. Bankers have been seeking a permanent increase.

To encourage loan modifications, the bill would change the Hope for Homeowners program to make it more palatable to servicers.

Despite the bill's focus on reducing premiums and enhancing modification efforts, much of the debate Tuesday centered on the Treasury Department's Troubled Asset Relief Program.

An amendment by Sen. John Thune, R-S.D., that would block the Treasury from recycling returned Tarp dollars by forbidding it from reinvesting funds that have been paid back failed by a vote of 47 to 48.

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