Senate Stymied Publicly, Progressing Privately on Finance Overhaul

Washington – Republicans continued Tuesday to block Senate efforts to begin formal debate on the most sweeping overhaul of the nation’s financial regulatory system since the Great Depression, as political sniping turned uglier and more partisan.

Democratic leaders were happy to cast Republicans as allies of Wall Street because of their obstruction of the measure, while Republicans insisted that they were delaying the bill to ensure that taxpayers won’t have to finance any more bailouts. Both sides were posturing with an eye on November’s congressional elections.

Still, at the same time, Senate negotiators continued cordial private talks aimed at reaching a bipartisan deal.

“We have made considerable progress in the last several days,” said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee. He and Banking Committee Chairman Christopher Dodd, D-Conn., continued private talks.

Publicly, Democrats spent a second day futilely trying to crack Republican solidarity in opposition to beginning formal debate on the bill, written largely by Democrats. In a replay of Monday, the 57-41 vote fell three votes short of allowing the Senate to proceed to formal debate, which would include considering amendments.

However, the Senate has been debating the bill informally all week and will continue to, though amendments won’t be considered until the Republican blockade is overcome. Test votes to break the blockade could take a toll on the private talks, though, because they spotlight partisan division and could make compromise more difficult.

“I do not understand the strategy of forcing these divisive votes,” said Sen. Susan Collins, R-Maine, a moderate whose support probably will be needed for a bipartisan majority. “It’s very strange to hear both sides say important negotiations are continuing, and then keep taking these votes.”

When she was asked whether the drumbeat of votes could erode bipartisan cooperation, she said, “It doesn’t help it.”

Shelby said the two sides had found some common ground on how to deal with troubled financial institutions, though he wouldn’t provide details.

The bill would allow the government to move quickly to dissolve ailing companies that pose a risk to the broader economy. Republicans remain concerned that the legislation would make taxpayers liable for breaking up doomed institutions, even though the bill has no bailout provisions. Shelby signaled that he’s getting assurances that won’t happen.

Republican senators are also worried about a new consumer protection agency and new policies on derivatives, the exotic financial instruments that helped cause the recent recession.

The Democrats’ legislation would require big banks to spin off divisions that trade in derivatives and would bar them from proprietary trading of them for their own accounts if they also trade on behalf of clients. Republicans — and some Democrats — think that the bill goes too far.

For consumers, the bill would create an agency to police mortgages, credit cards and other forms of consumer credit. Republicans maintain that the agency’s reach would be too broad, and that it would cause smaller businesses to be overburdened with new regulations and to have trouble attracting capital.

Dodd has called such claims an exaggeration and tried to calm concerns.

Shelby wouldn’t relent, however.

“The consumer agency part of this bill would be one of the most intrusive and sweeping pieces of legislation this country has ever seen,” Shelby said at a news conference. “If they will meet us halfway on that, we can get a bill.”

The prevailing public tone was very different from that statement, however, raising questions about whether the political posturing threatens the bipartisan effort.

Senate Majority Leader Harry Reid, D-Nev., painted Republicans as obstructionists beholden to fat cat Wall Street interests.

“It’s very clear the American people are demanding two things from us: that we look out for their jobs and we do our jobs,” Reid said. “Right now, the Republicans are refusing to do their jobs and certainly not take care of the jobs for the American people.”

Republicans fired back, saying that Democrats were forgetting the consumer and small business.

“It is certainly obvious it is a dramatic overreach,” said Senate Republican leader Mitch McConnell of Kentucky.

Senate Republican campaign committee Chairman John Cornyn of Texas said that Democrats were signaling that they really didn’t want Republican input.

“Democrats are expecting to write the bill all by themselves, just like they did with health care,” he said. “If we didn’t stick together like this, they’d just ram something through.”

On The Web

Senate Banking Committee report on financial overhaul bill

Senate Agriculture Committee report on derivatives bill

Sen. McConnell on financial overhaul bill