July 31, 2010 –   * Ethics trials could come weeks before elections

* Waters was under investigation for bank meeting

(Adds quotes on Rangel)

By Corbett B. Daly and Thomas Ferraro

WASHINGTON (Reuters) - A second senior U.S Democratic lawmaker may face a public ethics trial this fall, posing a possible setback to their party's efforts to keep control of the House in the November elections.

The House ethics panel is expected to say as early as Monday that its investigative subcommittee has found evidence that Representative Maxine Waters violated the chamber's ethics rules, a source familiar with the matter told Reuters.

The House panel unveiled ethics charges against Representative Charles Rangel on Thursday, and both lawmakers face potential public trials just weeks before voters head to the polls for the November mid-term elections.

Both are leading members of the Congressional Black Caucus, making the cases highly sensitive as Democrats are working to get a big voter turnout by African Americans, one of their traditional constituencies.

The committee had been investigating Waters, a 10-term lawmaker from Los Angeles, after a bank in which her husband had stock received $12 million in federal bailout funds.

Waters, who heads the House Financial Services Housing and Community Opportunity subcommittee, helped arrange a meeting of officials from that bank and other minority-owned financial institutions and Treasury Department officials, who later said they did not know of her husband's ties to the bank.

Waters has said the meeting was in keeping with her long record of promoting minority-owned businesses and lending in underserved communities.

The actual charges against the California lawmaker are not expected to be unveiled until sometime after lawmakers return in September from their summer recess, said the source, who said she intends to fight the allegations.

'WITH DIGNITY'

The revelations about Waters come after President Barack Obama on Friday called ethics charges against Rangel "very troubling" and said he hoped the former head of the House tax writing panel could end his career "with dignity."

Rangel faces 13 counts of violating House ethics rules, including failure to report rental income from a villa in the Dominican Republic and use of a rent-stabilized apartment for his campaign committee.

Democrats have urged Rangel to cut a deal to avoid a trial they fear could become a political circus and provide fodder for Republicans seeking to take control of the House.

Neither trial is expected to begin before September and it is still possible deals could be reached to close the cases before a public airing, though that possibility becomes less likely as the elections draw near.

New York's Democratic lawmakers met on Friday to discuss the Rangel case.

A senior Democratic aide described Rangel as "more blustery than ever" and said a "showdown (is) looming on the case."

"The point of the New York delegation meeting yesterday was to encourage his colleagues to read and be familiar with the case his defense team has made. At the same time, vulnerable members continue to return his money and ask him to resign," the aide said.

"Given Rangel's defiance and rallying colleagues to his side yesterday, a new fight by Waters isn't surprising," the aide said.

So far just a handful of Democrats have publicly urged him to resign.

The last time a sitting member of Congress went to a trial before his peers was Ohio Representative James Traficant in 2002. He was convicted on racketeering, bribery and other charges and served a federal prison term.

Democrats won control of the House in 2006, promising to rid the chamber of corruption after a series of Republican ethical problems, including an influence-peddling scandal that resulted in prison time for a top Capitol Hill lobbyist.

"Like Chairman Rangel, this is another example of Speaker (Nancy) Pelosi's most glaring broken promise: to 'drain the swamp' in Washington," said Michael Steel, spokesman for House Republican leader John Boehner.

Pelosi has rejected Republican complaints, citing an overhaul of House rules and requirements for greater disclosure, particularly in lobbying.

(Editing by Vicki Allen)