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WASHINGTON (Reuters) - The U.S. House of Representatives on Tuesday night begins considering a bill that would impose the biggest overhaul of the nation's campaign finance laws since the Watergate scandal a generation ago.

Largely opposed by Republicans, campaign finance reform gained new life on Capitol Hill following the collapse of Houston-based energy giant Enron Corp. , which critics say lavished campaign contributions on lawmakers to gain access to Capitol Hill and influence policy.

The legislation being considered in the House would ban unlimited "soft money" donations to national political parties, and place new restrictions on broadcast attack ads.

"I'm cautiously optimistic," said Rep. Martin Meehan, a Massachusetts Democrat, who is a chief sponsor of the bill along with Rep. Chris Shays, a Connecticut Republican.

Shays said no one can say for certain what will happen to the bill, but added: "I'd rather be us than them. We should win it. I think our cause is just."

House Republican leaders argue the Shays-Meehan measure would amount to an unconstitutional infringement on speech.

House Speaker Dennis Hastert, an Illinois Republican, also warned rank-and-file members last week that passage of the measure could cost them control of the chamber, a position Democrats rejected as unfounded.

CLOSE VOTE

"I think it is going to be a close vote," John Feehery, a Hastert spokesman, said on Monday. "I think Shays-Meehan right now has the upper hand."

"There is no doubt something will pass. But the question is what will it be and will it be able to win final approval from the Senate," said another House Republican leadership aide.

The 435-member House has an hour of debate scheduled for Tuesday night. Then members are expected to pass a rule governing voting on the legislation, set to begin on early Wednesday. The proposed rule would permit votes on up to 20 amendments and three alternative bills.

Among the amendments Republican leaders may offer as possible "poison pills" to scuttle the measure is one that would increase the limits on regulated "hard money" donations, and prohibit soft money to state as well as national parties, said the aide, speaking on the condition of anonymity.

Soft money refers to donations made to national or state political parties that are unlimited in size. Hard money refers to donations made specifically to a particular candidate or a party. Hard money donations are limited by U.S. law.

Those limits were imposed in the mid-1970s after the Watergate scandal that forced out President Richard Nixon.

In the 2000-2002 election cycle, the Democratic and Republican national committees raised about the same amount of unregulated soft money -- $250 million by Republicans, $245 by Democrats. Republicans pulled in far more regulated hard money, $466 million to $275 million for Democrats.

The bill's proponents said they may offer to push back the effective date of the legislation until after November's congressional vote to win over undecided House members.

Scott Harshbarger, president of Common Cause, one of a number of citizen groups lobbying for the bill, said: "We are making it clear to House members: 'You are going to vote for the people or for Enron."'

Enron made more than $6 million in donations to politicians since 1989, most of it in soft money.

The House begins consideration of the bill just hours after former Enron Chairman and CEO Kenneth Lay is scheduled to appear before a congressional panel examining the collapse of the firm, the largest bankruptcy in U.S. history.