WASHINGTON (AP) - With a showdown vote looming, Democrats are
resisting Republican appeals for a broad compromise on financial
overhaul legislation and are eager to test whether GOP unity will
crack in an anti-Wall Street political climate.
The top negotiators on the regulatory bill - Democratic Sen.
Christopher Dodd and Republican Sen. Richard Shelby - professed to
be close to a deal during a joint appearance on NBC's "Meet the
But Shelby conceded that "inches sometimes are miles," and the
two did not hold a negotiating session Sunday.
The legislation is the most sweeping effort to rein in financial
institutions since the Great Depression. Aimed at avoiding a
recurrence of the near collapse of the financial system in 2008, it
would create a mechanism for liquidating large firms that get into
trouble, set up a council to detect systemwide financial threats
and establish a consumer protection agency to police lending. The
legislation also would require derivatives, blamed for helping
precipitate the meltdown, to be traded in open exchanges.
The House already passed its version of the legislation.
Senate Republican Leader Mitch McConnell on Friday blocked
Democrats' efforts to bring the bill up for debate, setting up a
vote Monday that will require 60 votes to move ahead. McConnell and
Shelby said Sunday that without a deal with Dodd, all 41 Republican
senators would vote to stall the start of debate. Shelby said a
deal in time for the vote was unlikely.
But unlike the health care debate, public sentiment was not
working in favor of Republicans. Public opinion is leaning toward
more regulation of large financial institutions, and a Securities
and Exchange Commission lawsuit alleging fraud by Goldman Sachs has
added the cloud of scandal to Wall Street.
On Sunday, Dodd agreed to toughen his overarching bill with
stronger rules on derivatives, including one that had drawn
objections from the Obama administration, according to a Democratic
official familiar with the negotiations. Dodd entered into a
tentative deal with Agriculture Committee Chairwoman Blanche
Lincoln, D-Ark., to incorporate her committee's derivatives
provisions into the broader regulatory legislation. At least two
Republicans - Sens. Charles Grassley of Iowa and Olympia Snowe of
Maine - are on record supporting Lincoln's derivatives package.
Derivatives are the complex securities blamed for helping
precipitate the 2008 Wall Street crisis.
One of the most sweeping of Lincoln's restrictions would require
banks to spin off their derivatives business into subsidiaries with
a separate source of capital. Large banks fiercely opposed the
provision. The Obama administration has called for banks to end
trading in speculative securities but not to jettison operations
that create derivatives markets for clients.
In yet another attempt to attract Republicans, Democrats
appeared willing to jettison from the bill a $50 billion fund -
financed by large banks - that would have been used to liquidate
failing firms once considered "too big to fail." The fund has
been one of the main targets of GOP criticism.
Democrats said the time had come to move on with the bill.
"Are we going to start the debate or are we going to shut it
down and continue negotiating, negotiating, negotiating?" Sen.
Sherrod Brown, D-Ohio, asked on ABC's "This Week" Sunday.
For now, Republicans are using the only leverage they have - the
threat of 41 unified votes - to seek a bigger GOP imprint on the
The impasse reflects differences over how to contain large,
interconnected financial firms and how to liquidate them when they
fail. But Democrats and Republicans also differed on how to protect
consumers and how to set limits on previously unregulated exotic
instruments such as derivatives.
Dodd has already incorporated a number of Republican ideas into
his version of the bill following negotiations with Shelby and
Republican Sen. Bob Corker of Tennessee. Democrats, particularly
liberals, have become increasingly worried that a compromise with
Shelby will limit their ability to amend the bill during floor
Dodd tried to reassure them.
"We can't take care of everything in the bill," he said,
referring to his talks with Shelby. "Obviously our colleagues will
want to be heard."